Be sure to review your application thoroughly once you receive it back from your insurance company.
Life insurance is an important part of protecting your family in the event of an unfortunate event. But what happens if your life insurance company denies a claim? What are your options? Life insurance companies have a legal responsibility to provide services in a professional and efficient manner.
But sometimes, things don’t go as planned. Maybe you missed a few deadlines, or maybe you accidentally destroyed some important documents. Regardless of the reason, if your life insurance company denies a claim, you have options. You can appeal the decision, or you can work with a life insurance claims company to understand your situation and find a solution.
To assist you in your time of need, in the following sections, we’ll discuss how life insurance payout works, the many reasons why your life insurance company may deny a claim, and what you can do in such a situation. So, without any further ado, let’s get started!
What to Do if Your Life Insurance Company Denies a Claim?
If you’ve filed a claim on your life insurance policy only to be denied, it’s not the end of the world – but you do need to take action immediately. Life insurance policies have special rules and regulations that apply, so it’s important to understand these before taking any action. In this guide, we’ll explore what to do if your life insurance company denies your claim so you can resolve this frustrating situation as quickly as possible and move on with your life – regardless of what happens with your insurance provider.
How Does Life Insurance Policy Payout Works?
To remain compliant with state laws, every policy has unique benefits that are provided within certain timelines, but in general, they all offer one crucial feature; life insurance payout in case the insured person dies or is suffering from a disability (permanent or partial) while covered under a policy. Upon death or permanent disability, claims representatives for most life insurance companies call loved ones on behalf of the insured individual to inform them about their claim status. And when accepted claim payments come in, they’re sent directly to beneficiaries listed on each specific policy.
Answering basic questions about what happens when your loved ones pass away or become disabled often helps families find peace of mind. They understand what’s going to happen next and what steps they need to take to receive life insurance payout without too much drama.
In fact, having a plan in place before something unfortunate happens to you or your family can save everyone from hardship later on. So now that we have established the basics let’s go over some common reasons why life insurance companies deny claims and how you can handle such situations.
Definitive Reasons Why Life Insurance Claims Are Denied
If you’ve purchased a life insurance policy, you’ve taken a very important step toward protecting your family in the event of your untimely death or disability. However, life insurance companies – as a business – may not always be sympathetic to consumers’ needs. Sometimes they refuse claims for seemingly no reason at all – but these reasons aren’t necessarily unjustified. So, let’s go over some of these scenarios and see how they might affect your claim payments:
1. Policy Delinquency
A common reason why life insurance claims are denied is due to policy delinquency – or failure on your part to abide by your life insurance policy contract. For example, you could be guilty of not paying your monthly premium, missing an important deadline for submitting documents, or not providing all requested information in a timely manner. These issues will need to be corrected before you can qualify for payment. But once done and proven that they won’t occur again in the future, approval should follow shortly thereafter.
Moreover, some policies might have more strict requirements than others in regards to their membership agreements, so it’s crucial to read through all policy contracts thoroughly before signing on. If there’s any doubt about how some information applies to you, get clarification from your insurer right away! Otherwise, there may be future headaches down the road with being eligible for payout when tragedy strikes.
2. Material Misrepresentation
Material misrepresentation – or failure on your part to disclose key information about yourself during contract acquisition or renewal – might also disqualify you from receiving benefits during claims processing. This could be due to numerous factors, including not disclosing previous health issues that could result in complications, later on, falsifying income levels, lying about who will be your beneficiaries after you pass away or become disabled, not disclosing other life insurance policies you have in place already or did in the past, etc.
Most life insurance companies will ask for vital documents right when applicants are looking at their plan options online. It’s therefore important for each applicant to read through all relevant policy documentation carefully before finalizing purchases, so they don’t accidentally misrepresent any information down the road when filing claims due to ignorance rather than deceitfulness. If in doubt, call your agent and clarify! This is crucial to prevent future headaches with these processes when someone passes away suddenly and is left waiting weeks/months/years for payout.
To give you a better basic idea of what material misrepresentation looks like, below are some examples of behaviors that may result in life insurance claim denial:
- Not disclosing the real income level,
- Not declaring existing health conditions or insurance policies you had in place before purchasing one through your current insurer
- Neglecting to file correct, complete, and fully filled forms for your policy,
- Being dishonest about who will be named as beneficiaries after you pass away
- Not providing the right information related to immigration status.
3. Contestable Circumstances
Some life insurance claims can also be denied due to contestable circumstances. In these cases, you might have been in clear violation of your policy or contract terms at some point while you owned it – so chances are, it’ll be rejected down the road if a claim is filed. This type of denial usually stems from some form of fraud – even when minor and unintentional – on your part that could have been discovered during underwriting or claim investigation processes once submitted for review by insurance representatives. While you wouldn’t purposely cheat or break any rules when applying for coverage, sometimes we simply don’t know we’re doing something wrong. And other times, our attempts to mislead others might go undetected until much later down the road.
As you know, it’s extremely important to be honest on your life insurance applications. Many companies are now offering non medical exam policies, so may approve you without actually reviewing medical records. As an example, it’s easy to qualify for life insurance with type 2 diabetes without an exam. But you have to disclose your diabetic condition at the time of applying.
That’s why it’s crucial to always read through all relevant information provided by insurers before signing contracts, not only for accuracy but because you never know what small thing may disqualify your application or cause it to get rejected after filing a claim. If ever unsure about anything, reach out to agents immediately! It’ll help prevent future headaches with claims handling going forward.
4. Documentation Failure
This type of rejection might sound similar to material misrepresentation, and, in fact, some instances can be considered both – but they’re actually quite different. For documentation failure, you must not have provided your insurance company with an adequate amount of documents or information about your health status or anything else related to your application at some point during underwriting processes for coverage acquisition – so there’s no way for them to confirm anything related to you was accurate when contracts were signed.
Why the Contestability Period Matters
The contestability period is basically a time frame in which a claimant can dispute a life insurance company’s decision not to pay out their claims. You’ll find different contestability periods from one company to another, but usually, you have 60 days from the contract acquisition date or from when your coverage began its renewal term/cancellation period to file an appeal. As for what happens after that? It varies. Some companies allow for additional 60-day periods after contestability expires to pursue legal action against them, while others don’t – so it always pays off to check with your insurer right away before deciding on any course of action.
Things to Do if a Claim Is Denied
If you suspect that your claim is being rejected unfairly, or you’ve already been notified that it’s been denied, here are three things you should do right away.
1. Contact the Insurer
Sometimes, disputes over claims can be settled easily and with little to no effort by contacting your insurance company directly, explaining what happened, and asking for clarification on any parts, you might have misunderstood or not fully understood when submitting it for review. They’ll often help walk you through important procedures – from correcting forms errors to providing extra medical evidence – that will give them everything they need to better understand your health status at that time. If you don’t get an answer right away, ask someone else! There are many other employees available who will be able to assist you in getting answers more quickly – including underwriters, supervisors, mediators, customer service representatives…the list goes on!
So, keep trying until someone gets back to you with answers related to dispute resolution for your claim. Moreover, if you had an employer group life insurance policy (EGLI), contact your former carrier right away since most of these policies carry longer contestability periods than individual plans (around 60-days).
2. Contest the Rejection
If you don’t get an answer or are not satisfied with their response, it’s time to go on the offensive! That’s right – you can contest your claim rejection by formally appealing it within your state of residence – usually done through your state department of insurance. The good news is that contesting isn’t difficult or complicated, even though it might seem that way at first glance! Here’s how it works in four simple steps:
Ask for written confirmation that your appeal request has been received by contacting them again. Write down what they say and document all conversations you have related to contesting your claim – including dates, times, and who you spoke with, as well as what was said. Respond back as soon as possible after receiving their appeal decision; any further delays will only make it harder for you to make a case against them later on.
If your initial appeal is denied, wait until 30 days from when you receive notification of their decision before taking action. If they’re not willing to give in at that point, take legal action by hiring an attorney specializing in life insurance claims or working directly with a company like Standard Claims Services to file a complaint with Consumer Financial Protection Bureau (CFPB).
3. Engage with An Attorney
If your claim is denied after pursuing all aforementioned tactics, you may be able to win it by taking legal action – but only after getting legal assistance! That’s right – you’ll need an attorney to look at your situation and determine whether or not it makes sense for you to move forward with filing an appeal or lawsuit related to contesting your claim denial. There are certain firms such as Boonswangs-Law that specialize in this field.
There are many things to consider when deciding whether or not litigation is worth pursuing in your case, including how much money would be involved, what role you could play in winning, how long it might take…and more. It’s always best to get help from someone who knows these situations inside-out rather than attempting to go at it alone without having any experience doing so.
What Are the Differences Between Primary Beneficiaries and Secondary Beneficiaries?
The whole purpose of purchasing life insurance is to help protect your loved ones in case something happens that puts you out of commission. This means that, of course, there are times when your life insurance policy will need to be cashed out (and paid for) on behalf of someone else who’s benefitting from it. To help you better understand what benefits they’re entitled to, let’s discuss what primary beneficiaries and secondary beneficiaries are!
1. Primary Beneficiary
You’ll find that sometimes people refer to primary beneficiaries as first-named or first-in-line beneficiaries – but regardless of their titles, these parties stand at the top of the line when it comes time to receive benefits related to your policy once you’ve passed away. For example, let’s say you and your spouse each purchase life insurance policies; if something happens and you die without leaving behind any other heirs (meaning there is no will), then your spouse would become eligible for being named as the policy’s beneficiary. If they died before using up all of those benefits, though, then who would get them? That’s where secondary beneficiaries come in!
2. Secondary Beneficiary
As their name suggests, these parties (which could be your parents, children, siblings, etc.) are second-in-line when it comes time to receive benefits related to your policy once you’ve passed away. And unlike primary beneficiaries who are allowed access to any funds or benefits left behind by virtue of being named on your policy – secondary beneficiaries are only allowed limited access based on how they’re named on policies.
How to Prevent Having a Claim Denied?
There are many ways you can help prevent having your life insurance claim denied. Let’s get into that now!
1. Application Responses
This is your first line of defense when trying to prevent claim denials – and it’s also one of your most important areas as well! The more accurate you are when filling out forms and paperwork, as well as responding to questions during medical exams, there better chances you’ll have with preventing life insurance companies from denying your claims or issuing the coverage you need at prices that are too high for your budget.
2. Understanding the Terms & Conditions
You should also read through and familiarize yourself with all of your policy’s terms and conditions, including exclusions, limitations, premiums, etc., when purchasing life insurance. And when in doubt – ask! Most reputable agents will be happy to help you understand your policy and make sure you’re getting exactly what you need.
3. Application Review
Be sure to review your application thoroughly once you receive it back from your insurance company – including filling out any needed changes and providing all requested documents! If there are any mistakes on your end that could be preventing you from receiving life insurance coverage, that’s better for you to catch before they do rather than later down the line!