Life Insurance Policy Denials

Many individuals purchase life insurance policies to ensure that their loved ones are protected and provided for in the event that they are unable to do so as the result of an untimely death. Following the loss of a loved one who may also be a financial provider, a beneficiary can suffer another financially devastating problem – their loved one’s life insurance company may deny or dispute payment of their life insurance claim. The most unfortunate part of life insurance law disputes is that they affect people when they are going through one of the most difficult and stressful times of their lives.

Billions of dollars in annual marketing obscures a hard fact: insurance companies are a business and they stay profitable by limiting the number of claims that they pay out. Common life insurance policy denial tactics include disputes over the information provided on the life insurance application; the beneficiary’s failure to adhere to the claim filing process, allegations of fraud and misrepresentation; policy construction and interpretation disputes; disagreements over the effective date of coverage or the cause of death; and premium payment issues.

One of the most common tactics life insurance companies use to deny a claim is to accuse the insured of making a “material misrepresentation” on the application for the insurance policy. This tactic is commonly used by the insurer if the deceased passed away during what is called the “contestability period,” which is the period of time (usually 2 years following the date of effective coverage) during which a life insurance company can rescind coverage based on a material misrepresentation within the original application for life insurance benefits. In other words, the insurance company will claim that the insured failed to disclose medical or personal information on his or her policy application and, had the insurance company known that information, they would have excluded certain medical conditions or causes of death (which of course would include the insured’s cause of death); or that they would have refused to issue the policy to the insured. Thus, the company sends back a check for all premiums paid and denies coverage and benefits. Too often, the alleged misrepresentation is based on the insurance company’s own disingenuous investigation. Commonly, insurance companies base these accusations upon misrepresentations relating to:

• Occupation
• Employment history
• Age
• Income
• Tobacco use
• Alcohol consumption
• Assets
• Other life insurance policies
• Dangerous hobbies or traits

Another common denial tactic is for the insurance company to claim that the deceased was not covered under the policy at the time of his/her death because they failed to pay an insurance premium. What the insurance company may fail to disclose is that the policy contains a waiver of premium provision which waives the need for the insured to pay the policy’s premiums if he or she is totally disabled. Thus, under many policies if the insured was extremely ill, severely injured, hospitalized, incapacitated and/or unable to work as the result of an illness or injury they do not have to pay the premiums due during that period and coverage will remain in effect. Unfortunately, many beneficiaries are unaware of such policy provisions and are unfairly denied benefits.

A third common tactic utilized by life insurance companies to delay payment of a claim or deny coverage is to dispute the effective date of the policy’s coverage or the cause of death. The company wears down the bereaving beneficiary and loved ones by harshly challenging these aspects of the claim and asking for an overwhelming amount of information; anticipating that the beneficiary will become too intimidated and overburdened to pursue the claim and will just go away.

It is important for beneficiaries to understand their rights under the insured’s life insurance policy so they can obtain the benefits left for them by their loved one. At Disability Insurance Law Group, we are committed to providing professional, effective, and compassionate legal representation to our clients.