You may think that purchasing a life insurance policy is the safest way to provide for your loved ones after your death. It is a simple transaction with you paying your premiums and your loved one receiving a payout after your death.
Unfortunately, if it were that easy, not many life insurance companies would remain in business for long. In fact, most policies contain language that can provide numerous ways for insurance companies to avoid paying your loved one's claim.
Every state allows insurers to have certain factors they call exclusions. These exclusions are no mystery. In fact, you would do well to read the fine print on your policy so you understand the exclusions your insurer may use to deny a claim. Some common exclusions are the following:
- If you take your own life within two years of purchasing the policy
- If your death is the result of drug or alcohol abuse or occurs while you are under the influence of drugs or alcohol
- If your death occurs during the commission of a crime
- If you perish in the crash of a private airplane
- If you die as a result of an act of war, whether you are serving in the military or a civilian caught in a conflict
- If you die while engaging in activities the insurer considers dangerous, such as racing cars, bungee jumping or skiing
Your insurer may allow you to include certain dangerous activities on your policy if you pay a higher premium.
A common exclusion is when an applicant for life insurance misstates his or her age. If you intentionally misrepresent your age, even if it is only by one day, the insurer will likely deny a claim for benefits.
Contesting your claim
The first two years after the purchase of a life insurance policy are the contestability period. If you should pass away during this time, the insurer may contest any claim your beneficiaries make on the policy. This does not always mean the insurer will deny the claim, but it does mean agents will scrutinize the policy as well as the circumstances of your death to determine if you withheld information about your health when purchasing the policy.
These are only a few reasons why an insurer may deny a claim, and your family may find themselves struggling if the insurer fails to come through with a payout they rightfully deserve. Seeking the aid of an attorney may improve their chances of obtaining the benefits an insurer unfairly withholds.