If a life insurance company is delaying payment of your claim, you may be owed interest. When an insurance company denies or delays your claim, they can continue investing the proceeds that would otherwise be in your pocket. The insurer may owe you the interest they accrued by holding onto your money. To find out if you are entitled to interest on your delayed payout, contact the life insurance attorneys with over 25 years of experience at the Boonswang Law Firm.
We will describe some real-life situations our clients have faced and how we got them paid. While these are all true case studies, keep in mind that we cannot guarantee that the result of your matter will be the same.
What is the typical timeline for insurance companies to investigate claims?
After the insured has died, beneficiaries to the life insurance policy must file a claim with the insurance company. Claimants will be required to include a copy of the death certificate with their claim. It is important that you keep at least one original death certificate in your possession in the event that the life insurance company misplaces the one you sent them. When the insurance company receives the claim form and a certified copy of the death certificate, insurers have 30 days to deny the claim, pay the claim, or ask for more information.
In some situations, insurers will need to investigate a claim, and the time of payment of claims will exceed 30 days. Depending on the terms of the insurance policy and the laws that govern the policy, sometimes a beneficiary will be entitled to interest that has accrued during the delay of payment. Contact a life insurance lawyer at Boonswang Law to learn what the timeline is in your jurisdiction, as they differ depending upon where you live.
Delay in payout instead of denying or approving
In most cases, an insurer will either deny a claim or pay a claim. Occasionally, an insurer will require a longer period to investigate a claim. Delays may occur in the following situations:
- The insured died by homicide. When an insured is murdered, the insurance company often waits to pay any benefits until the investigation is completed. Depending on the type of policy in question (whole life or accidental death), the insurance company may need to know whether the beneficiary is associated with the murder or whether the insured was engaged in a felony at the time of his or her death.
- The insured died in a foreign country. If the insured dies while abroad, an insurance company may take longer to investigate. Insurers always require proof of death when a claim is made. In the U.S., a death certificate is an acceptable proof of death. However, customary practices, records, and technologies vary across countries and continents. To ensure a claim for overseas death is not fraudulent, an insurance company may attempt to independently confirm the circumstances of the insured’s death. Depending on where the insured died, this may extend the investigation period significantly.
- A beneficiary dispute occurs. If the insurance company is notified that multiple parties might have a claim to life insurance proceeds, it will postpone paying the benefit until a rightful beneficiary is established. Often, the insurance company will not make this determination itself. The insurer may file an interpleader action, and a court will decide the lawful beneficiary. In one case we had, the insurance company delayed paying for over two years because the insured had a girlfriend and child, neither named in his policy. Luckily for our client, Illinois law prevents such improper claim practices and unreasonable or vexatious delay in paying claims, and we were able to get our client paid.
- The insured died within the contestability period. The contestability period lasts for two years. During this time, an insurer is allowed to investigate the original application to look for evidence of fraud. If the insured dies within this two-year period, a payout of benefits may be delayed while the insurer examines medical records, financial records, or other relevant evidence.
- The insurance company made an administrative error. In one case, our client’s claim was delayed because the insurance company never received medical records from a doctor that the insured neer visited. If your claim is denied, please get all the details you can about the reason for the denial – it may be something this simple.
- The insured never received notice of lapse or termination, and the policy lapsed and/or terminated. In this case, our client’s claim was denied because the insured never received the statutorily-required notices. We got our client paid.
How can a beneficiary get interest?
If an insurance company delays their response to your beneficiary claim, you may be entitled to interest. Interest varies depending on jurisdiction and policy terms. The policy may state that a beneficiary is entitled to interest after a specified delay. Some states also have statutes that grant interest when an insurer unreasonably delays a claim determination. For example, this Iowa statute explains the circumstances that allow a beneficiary to collect interest, and the rate at which the interest is calculated.
Some circumstances of delay are inherently unreasonable, including:
- A delay in payment after the claim has been approved. Occasionally, an insurer or a company’s agent will tell a beneficiary that a claim has been approved, but the insurer will be slow to send payment. The longer an insurer retains the funds, the longer an insurer is able to continue investing those proceeds and reaping the profits.
- An insurer has reason to know that an insured died, but does not reach out to the beneficiary. Sometimes, a beneficiary is unaware that he or she is named in a policy, or that a policy even exists. If an insurer has reason to know that an insured has died, for example, because they use the Social Security Death Master File to identify policyholders who have died, that insurer should notify the beneficiary. Recently, several states have brought lawsuits against insurance companies that knew of policyholder deaths but failed to notify beneficiaries, and instead retained the benefits. If a beneficiary does not find out that he or she is entitled to benefits soon after the insured dies, the beneficiary may be entitled to interest due to the delay.
What can a lawyer do if the insurance company delays instead of denying or approving a claim?
An experienced life insurance lawyer will be able to tell you whether the delay can be turned into approval and whether you are entitled to interest for the time of the delay. Frankly, an insurance company has no incentive to tell you that you are entitled to interest.
A life insurance attorney can demand and obtain the full benefits you are legally entitled to. Again, your right to interest depends on the jurisdiction in which the policy was issued and the terms of the policy itself. For more information about your rights to interest on a delayed payout of benefits, contact a trusted life insurance attorney at the Boonswang Law Firm with your questions.