All life insurance policies include a death benefit, which is the money your beneficiaries receive from your life insurance policy in the event of your death. This payout can provide financial security to your loved ones once you’re gone and is a big reason many people choose to purchase life insurance coverage.
To collect the death benefit of a life insurance policy, the beneficiary must file a claim with the insurance company. In certain instances, this claim can be denied.
Why might a life insurance claim be denied? These are a few of the most common reasons life insurance companies might refuse to pay:
Reasons Life Insurance Won’t Pay Out the Death Benefit
- Lying on Your Application
Life insurance applications require you to disclose a lot of information about your health, background and lifestyle, such as your medications, health conditions, criminal history and use of drugs and tobacco. If you provide false information on your application, life insurance can refuse to pay the death benefit to your beneficiaries. Even details like weight and income can result in a rescinded policy if you’re caught supplying false information. Material misrepresentation is the main reason that life insurance claims are denied, accounting for two-thirds of disputed claims.
- Self-Inflicted Injury
Deaths by self-inflicted injury, such as suicide, may disqualify your beneficiaries from receiving any benefits. Often, the insurance company will provide a refund on premiums paid instead.
- Excluded Activity
If you look closely at your life insurance policy, you may find a list of excluded activities. Common excluded activities include illegal or criminal activity, acts of war and aviation. Risky hobbies and occupations can also disqualify your beneficiaries from receiving a payout. For example, skydiving on the weekend or motorcycle racing.
- Lapsed Policy
For term life insurance policyholders, outliving your policy would mean you no longer have coverage at the time of your death. In this case, your beneficiaries’ claims would be denied. However, even if you have whole life insurance, it’s possible for your policy to lapse if you haven’t been paying your premiums. Most policies allow for a 30-day grace period, but past that, you may be at risk of a canceled policy.
- Dying During the Contestability Period
The first two years of a life insurance policy are typically known as the contestability period. This is the time period that allows your insurance provider to review your application for misrepresentations or false information. Therefore, if you were to die during this two-year period, the company could further investigate the claim for potential fraud or misrepresentation.
How To Appeal a Denied Life Insurance Claim
If your life insurance claim is denied, your beneficiaries will receive an explanation, either written or verbal, explaining why the insurer made the decision to reject their claim. Your beneficiaries should start by contacting the insurance provider to learn which documents or proof they’ll need to support their claim.
Appealing the claim is a more involved process. Your beneficiaries can seek assistance from your state department of insurance or hire a lawyer to help build their case.
Life Insurance for Seniors
AFL helps seniors get the coverage they need through individualized insurance plans with budget-friendly premiums. With a quick application process and flexible benefit options, we have a plan tailored to meet your needs. Contact us today to get a free quote or visit our life insurance FAQ section for more information.