Purchasing a life insurance policy is for most people an attempt to cushion their family against the financial devastation the death of loved one can cause. But what happens when life insurance companies deny a claim and refuse to pay out on a valid life insurance policy? If the beneficiaries of the life insurance policy do not have the help of an experienced life insurance claim attorney, having your life insurance claim denied could cause chaos.
Life Insurance Claim Denied Reasons
The first step to understanding why you are experiencing a life insurance claim denial is to understand how life insurance companies make their money. Life insurance companies survive because they receive more premium payments than they pay out in claims. This is why they carefully examine any life insurance claim for material misrepresentations.
Material misrepresentation is when the policyholder misstated or omitted important facts when they applied for their life insurance policy. Below are examples of material misrepresentation on an insurance policy:
- The policyholder said they were a non-smoker when in fact they smoked at least a few times a week. Even if the death of the policyholder had nothing to do with smoking, beneficiaries could still suffer an insurance claim denial.
- The policyholder lied about their employment history or income. Once again, even if their death was not employment related, the beneficiaries may still face an insurance claim denial.
- The policyholder engaged in some type of risky sport or hobby but failed to disclose it when applying for their insurance policy. This can definitely result in an insurance claim denial if the policyholder died engaged in a risky sport or hobby even if it was their first time engaging in the activity.
When an insurance company denies a claim based on material misrepresentation, they can only do so legitimately if disclosure of the omitted information would have impacted their decision to issue the life insurance policy. Unfortunately, illegitimate claim denial tactics are surprisingly common and many insurance claim denials are based on omissions which are petty or irrelevant.
We know how frustrating it can be to have your life insurance claimed denied. But we also know how to handle these cases, taking on the insurance company, making them account for their delays and dishonest business practices, and getting you the full amount your family deserves. If your life insurance claim has been denied or delayed, talk to one of our life insurance lawyers free to see if you have a case.
What to Do When Your Life Insurance Claim is Denied
You were probably shocked when you got a letter in the mail saying that your loved one’s life insurance claim is denied. You’re not the only one. An estimated 10 percent of rightful insurance claims will be denied every year. Those denials make millions for insurance companies and leave people who trusted them without a leg to stand on.
For a lot of people, the story ends there. They accept the rejection and move on as best they can. But others stay in the fight, winning a settlement much larger than the insurance payout they were denied.
Taking Action if Your Life Insurance Claim is Denied
If your life insurance claim was denied, take the following actions immediately to start building your case:
- Call your insurance agent. Go through your records to find the name of the person who sold you the policy. If you don’t have a person by name, call customer service and get answers. If you don’t understand terminology, the service person should be able to explain it to you.
- Go up the ladder. If the customer service rep is dismissive or unable to give you information, request to speak with his superior. If his superior is unhelpful, talk to someone else, taking names as you go until you find someone who can answer your questions.
- Request a written explanation. Many companies will hesitate to provide written documents, as they can be challenged in court. By demanding a written letter, you are asking for evidence—implying that you are willing to take your case to court if you have to.
- Make an appeal. Statistically, less than 1% of customers whose claims are denied will make an appeal—allowing the insurance company to get away with taking their money and providing nothing in return.
- Get a lawyer. Hiring an experienced life insurance lawyer will make your insurance company realize that you’re not going away.
If your life insurance claim is denied wrongfully, our attorneys can help get you the compensation you deserve. Contact Life Insurance Law today for a consultation.
Frequently Asked Questions
Can an insurance company legitimately deny a life insurance claim? If all information on the policy is correct and it is force when the policyholder dies, a life insurance provider cannot deny a life insurance claim. Since they are contractually obligated to pay, the only thing they can do is to withhold the benefits you are entitled to by delaying payment. If you are persistent, they may attempt to keep at least some profits by offering you less than the full amount of your claim. These practices are not only unethical, they are also illegal.
What is the difference between term life insurance and whole life insurance? All life insurance involves a contract between an insurance provider and the policyholder. Upon the policyholder’s death, the insurance company pays a sum of money to the policyholder’s family. After the period of contestability in a life insurance application has passed, the contract cannot be canceled by the insurance provider for any reason.
There are two main types of life insurance: Term life insurance provides an agreed-upon amount to the insured’s beneficiaries only if the policyholder dies during the length of time specified in the policy. In contrast, whole life insurance remains in force until the policyholder’s death.
What is the period of contestability? This refers to the amount of time between application for the policy and the time it cannot be disputed, usually a period of two years. In this period, the insurance company still has the right to examine the policy for material misrepresentations and deny the claim if they believe false information was given.
What is material misrepresentation? A material misrepresentation is any distortion of facts given to the insurance company by the policyholder. This could be anything from concealment of the truth to outright fabrication. In order for the insurance company to deny coverage, the material representation must cause a significant difference in the amount of risk sustained by the policyholder, such as age, income level, occupation, assets or substance addictions.
The number one reason life insurance claims are denied is some form of material misrepresentation. However, many life insurance providers will cite a misrepresentation that has nothing to do with the assessed risks or cause of death to avoid payment. At Life Insurance Law, we work to disprove material misrepresentation claims and get you the life insurance benefits you deserve.
What is “bad faith” insurance? “Bad faith” refers to any insurance company that has failed in its legal responsibilities to you, either by illegitimately denying your claim or offering you a drastically reduced amount of compensation.
When should I accept a settlement from the insurance company? You should never accept a settlement without speaking to an attorney. Many times when the insurance company offers a settlement, it’s because they know your claim is legitimate and they are trying to avoid paying the full amount. If you have been offered a settlement by your insurance provider, don’t say yes without a free consultation with an attorney at Life Insurance Law.
How does accidental death affect my life insurance claim? An insurance company may view an accidental death as intentional, since it will allow them to invoke a suicide clause to deny your claim. They may also refuse payment if your loved one was engaged in risky behavior or had alcohol or drugs in his system at the time of death.
Do I have to live in Pennsylvania or New Jersey for Life Insurance Law to take my case? No. Life Insurance Law represents clients across the United States, working with local lawyers in your area to get you the full compensation for your claim. Call us today for a free consultation with an experienced life insurance claims attorney.