Life insurance is often purchased to protect the surviving beneficiary or beneficiaries financially, especially if the insured was a breadwinner. Because of this, it is important that insurance companies timely pay life insurance benefits. The last thing a grieving life insurance beneficiary should have to deal with is an unreasonable delay or denial of benefits by an insurance company.
What are the most common life insurance company delay or denial tactics?
When denying claims, insurance companies often cite to policy provisions and exclusions that are convoluted or difficult to understand because they are full of legal terms or ambiguous language. Sometimes this is done to convince beneficiaries that they do not have a right to benefits when they do.
When a claim is delayed or denied, it is essential that you seek legal advice, as insurance companies often misinterpret the applicable law and policy language. The following are the most common delay or denial tactics utilized by life insurance companies:
Alleged misstatements in the application for coverage:
Most policies contain a contestability period (which is usually the first 2 years after a policy is issued). If the insured passes away within this period, the insurance company may contest the issuance of the policy if there are material misstatements of information in the application for coverage. Many policies and state laws also allow the insurance company to void the policy after the contestability period if the insured intentionally (fraudulently) provided false information in the application.
This allows the insurance company to scrutinize the information obtained during the application process. Very often, if the insurance company can point to any incorrect information, it will claim that it would not have issued the policy and therefore, the policy is null and void. However, minor and inconsequential errors are not permissible reasons to void a policy during the contestability period. Likewise, non-intentional misstatements discovered after the contestability period is not a valid reason to deny a claim.
The cause of death is allegedly not covered under the policy:
Many policies contain exclusions for death resulting from certain causes. The most common are:
- Drug or alcohol use;
- Illegal activities;
- Acts of war or riot; or
- Dangerous activities or hobbies.
Many exclusion provisions are ambiguous and often, when read together, the exclusions cancel each other out. Despite this, life insurance companies routinely cite these exclusions to wrongfully deny claims.
Premiums were not paid and the policy allegedly lapsed:
A common denial claim made by insurance companies is that the policy lapsed prior to the insured’s death due to a failure to make premium payments.
Beneficiaries have the right to be told whether the insurance company sent premium notices to the insured at the insured’s correct address and whether the notice clearly explained to the insured that the policy would lapse if the premiums were not paid.
The insured’s employer failed to submit a coverage application or a waiver of premium application:
Group life insurance coverage obtained through employment is very common. Typically, the insured’s employer is responsible for explaining the benefits to its covered employees, submitting necessary information to the insurance company, providing appropriate documents to its covered employees, and collecting and paying premiums.
Unfortunately, employers may inadvertently misrepresent policy information, fail to inform a covered employee of necessary information or steps that must be taken to obtain or continue coverage, and fail to submit documents to the insurance company. Such mistakes can lead to a lack of coverage or a denial of a claim.
Many times, covered employees are never aware of these issues and believe they have coverage. For example, the employer may collect premiums from the covered employee, but fail to tell the covered employee that they must fill out necessary paperwork before coverage will be issued, or it may fail to submit the employee’s completed paperwork to the insurance carrier. In such cases, the covered employee may reasonably believe that he/she has done everything necessary to secure and maintain coverage.
Likewise, many policies have a waiver of premiums provision which suspends the requirement to pay premiums during a period of disability. If the employer fails to appropriately explain the steps necessary to obtain a waiver of premiums under the policy or to submit the required paperwork to the insurance company, the waiver may not be put in place before premiums become due. The insured may never know that this occurred, and their beneficiary may subsequently be told that the coverage lapsed due to a failure to pay premiums. In certain circumstances, a beneficiary may still be able to collect the proceeds of an insurance policy through the legal process.
How can we help?
A delay or denial of a life insurance claim can be financially devastating. Disability Insurance Law Grouprepresents life insurance claimants at all stages of the insurance process. If you have any questions regarding your life insurance claim, our team of attorneys would be happy to provide you with a free consultation. Please contact us at 954-633-8811 or email us.