You may find yourself in a situation with your life insurance not paying out. A life insurance company can refuse to pay a claim for many reasons. What are the reasons life insurance claims are denied?
Just because your claim was initially denied does not mean that you do not have options. You can fight an insurance company when your life insurance is not paying out. Call us at 855-865-4335 to discuss the specifics of your life insurance policy and learn about your options.
Life insurance policies are supposed to protect families and dependents in the unfortunate event of a loved one’s death. Life insurance policies are valid, legally binding contracts between policyholders and insurance companies. So, how is it that your life insurance is not paying out?
Remember, life insurance companies only make money for their shareholders when they don’t pay claims. Here are the most common reasons life insurance won’t pay out.
There was a Suicide Exclusion in the Life Insurance Policy
If your life insurance policy has a suicide exclusion, the beneficiaries will not receive the death benefits if the insured died by committing suicide. Suicide clauses often differ depending on what state’s law applies to the policy.
These exclusions commonly state something along the lines of, “if you commit suicide within the first two years of this contract, the beneficiaries will receive a premium refund, but not the death benefit.”
One common complication with enforcing suicide exclusions is proving that the insured actually committed suicide. It is not uncommon for an insured to die accidentally, resulting in what might look like a suicide.
One case in which we got our beneficiary client paid arose when the insured died due to autoerotic asphyxiation. The autopsy stated that the cause of death was accidental, as the insured had laid out clothing for the next morning. The insurance company had the burden of proving that the insured “purposefully injured himself” (an exclusion) and could not as there was evidence the insured intended to survive.
Keep in mind that although we were successful in this case and many others, we cannot guarantee the result of any other matter. But we can guarantee that at the Boonswang Law Firm, our attorneys have extensive experience in taking on the challenge of disputing these suicide exclusions. As a result of our skill and knowledge in insurance law, we have been able to successfully obtain death benefits for clients who had previously been denied payment in the face of suicide exclusions.
Life Insurance Claim Denied Due to a Drug Exclusion
Many policies also have exclusions that will prevent a beneficiary from receiving the death benefit if the insured died due to illegal drug use and/or even prescription drug use.
Insurance companies often apply this exclusion in situations where marijuana or some other drug was found in the insured’s toxicology report. Insurance companies also will apply the exclusion in cases involving heroin overdoses or when someone took too many prescription pain pills or other medication.
Does life insurance cover drug overdoses? Sometimes. Some states have laws that protect life insurance policyholders who are prescribed narcotics or who are deemed disabled due to addiction.
One recent case in which we successfully got our client beneficiary paid arose when the insured died in a motorcycle accident. The toxicology report stated that the insured had “acute amphetamine intoxication” so our client’s death benefit claim was initially denied. However, ultimately it was determined that the insured died of injuries sustained in the motorcycle accident some several weeks later, not from a drug overdose the day of the accident.
Of course, we cannot guarantee the result of any matter. However, our attorneys at The Boonswang Law Firm are extremely knowledgeable in life insurance laws across the country and the nuances one must argue when faced with claim denial due to policy exclusions. Our knowledge and experience help us zealously fight for our clients and get them the death benefits they deserve.
Life Insurance Claim Denied Because the Insured Died During an Illegal Act
This might seem like common sense, but there are plenty of times people do illegal things and don’t realize it. For example, what if you were jogging and unintentionally trespassed on private property? If you had a heart attack and died while jogging, the insurance company will try to deny your beneficiary’s claim because you were doing something illegal when you died.
Life Insurance Claim Denied Due to an Act of War
Most policies have an Act of War exclusion to deny the claims connected to civilians killed in wars. This will commonly apply to first aid and other medical volunteers in an area of conflict, journalists, and others who travel to regions of the world where there is armed conflict.
Claim Denied Because the Insured’s Death Was Due to Another Exclusion
Every policy has a set of exclusions, and they differ from insurer to insurer. If there is any chance the insured’s death was excluded from coverage, the insurance company will leap at the chance of denying a beneficiary’s claim.
This is especially the case in AD&D policies, in which companies will define “accidental” death in a manner that is deliberately hard to satisfy. Common provisions are that the insured must die within 90 days of the injury which caused his or her death and that death in an airplane is not covered if you are a pilot.
Recently we settled a case where the insured died of drowning, but he drowned due to an undiagnosed heart condition. We argued that “accident” is an event that is not a natural and probable result of the insured’s own acts. In this case, there was no way the drowning could have been naturally and probably expected or anticipated by the insured because it was caused by his undiagnosed heart condition. Our client got paid.
Life insurance will often not pay out to beneficiaries’ and try to apply exclusions even when they are legally required to pay out. An insured should disclose participating in any activities that are considered dangerous by the insurance company. This might include skydiving, motorcycle riding, mountain climbing, kayaking, surfing, or anything that could be subject to exclusion under some policies. This way, an insured can get the type of policy that is right for them and their lifestyle.
Claim Denied Due to Misrepresentation On Application
Death benefit claims are frequently denied due to alleged fraud on the part of the insured. If the insured did not disclose a past or present health condition, medications, or past surgeries, did not disclose past or present lifestyle habits such as alcohol or drug use, or did not disclose participation in activities that the insurance company deems dangerous, the insurance company is sure to deny a claim for death benefits if the insured died due to any of these.
If the insured died during the two-year contestability period, but not of anything he or she failed to disclose on the initial application, the insurance company will still deny the claim. We have gotten our client beneficiaries paid under these circumstances.
The most common allegations of misrepresentation include:
- Medical History
- History of Tobacco or Drug Use
- Financial Background
- Criminal Background (Arrests or Convictions for Serious Offenses)
Agent Negligence Causing an Error or Omission on the Application
We have gotten many client beneficiaries paid when their claim was denied because the insurance agent made a mistake completing the insured’s initial application for insurance. The life insurance company will deny beneficiaries’ claims due to alleged fraud, when the mistake was in fact the agent’s.
Claim Denied Due to Nonpayment of Premiums
When the life insurance premiums are not paid, the policy will lapse and terminate. However, we have gotten many beneficiaries paid under these circumstances because the fault is frequently not the insured’s.
When you buy a life insurance policy, the insurance company’s obligation to pay out is contingent on the policyholder having paid the premiums. Life insurance may not pay out due to nonpayment of premiums.
If you forget to pay, the insurance company will typically provide a “grace period” for making late payments of around one month from the due date. If you do not pay within the grace period, the policy will “lapse,” and you will no longer be covered. Even if you’ve been paying diligently for decades, your policy can be terminated after missing one premium payment.
Lapse in coverage because employee stops working and employer stops paying premiums
Sometimes policy lapse and termination happen through no fault of the insured. For example, if ERISA controls, there are many safeguards in place for an insured who does not receive the required notices and application for conversion from their employer, and their employer simply stops paying premiums on their behalf. Beneficiaries can get paid even if the policy lapsed in these circumstances!
Lapse in coverage because the employee went on disability and the coverage ended
Again, there are notices that the employer is required to provide an employee if the employee is out of work on disability. The employer may not simply stop paying premiums.
Death Due to Extreme or Dangerous Activities
So-called “Accidental Death & Dismemberment” policies (AD&D) are commonly sold under the impression that if the insured dies of a non-natural, “accidental” cause, a death benefit will be paid to his or her beneficiaries. However, it is common for accidental death insurance claims to be denied.
Insurance companies often define “accident” in an arbitrarily specific manner, in which long lists of provisions must be satisfied before they agree to pay out. For this reason, companies will frequently base their denial on evidence surrounding the circumstances of the insured’s death. It should be noted that AD&D policies never cover suicide or health-related deaths, since both of these scenarios would not qualify as an “accident.”
We recently settled a matter where the insured died from severe injuries he sustained in a motorcycle accident, several weeks after the accident. Our client’s claim was initially denied based on “acute amphetamine intoxication” and benzodiazipine use, although no medical history was available, no autopsy was ever performed, and the medical examiner never viewed the body.
We argued that the insured’s cause of death was the injuries sustained from the accident, having nothing to do with drug use, that forseeability of the accident is legally irrelevant, and that even deaths resulting from negligence (taking drugs then driving) may still be an accident. We got our client paid!
Death During First 2 Years of Life Insurance Policy
In most states, the first two years of a life insurance policy are considered the “contestability period,” i.e., the period of time during which an insurance company can review and fact-check information on a life insurance application (see our previous blog post about what happens when someone dies shortly after getting life insurance).
If the insured dies during the contestability period, the company will do a full investigation of the individual’s medical records as well as any other information requested on the application.
This means that if there were any misrepresentations, falsities, or omissions on the application, the insurance company may retroactively cancel the policy and refund premiums instead of paying the life insurance claim. This is an extremely common tactic among insurance companies, even when the misrepresentation in question is unrelated to the insured’s death. All too frequently, life insurance claims are denied due to a mistake on the application.
For example, we got our beneficiary client paid in full when the insured died within the contestability period of heart failure. We argued that the insured had no history of heart failure and therefore could not disclose that.
You should also know that most life insurance policies contain a two-year “suicide clause,” in which claims can be denied in the event of a policyholder’s suicide.
This is meant to deter people from buying policies with the intention of committing suicide shortly afterward, thereby leaving large life insurance benefits for their family members. However, suicide is not always clear-cut, and life insurance may not pay out when there exists a mere possibility of suicide.
An insured should always disclose any past or present health conditions, surgeries, and medications, as well as lifestyle habits such as previous or current smoking, drug use, or alcohol use.
Claim Denied Because the Insured Died Abroad
A policy may specify that if you die while living outside the United States, that is an exclusion that results in claim denial. Be sure to inspect your policy for this exclusion if you plan to live abroad.
If you die while traveling abroad, the insurance company may delay paying on your beneficiary’s claim while they investigate.
Claim Delayed or Denied Due to a Problem with the Beneficiary
Insurance companies invariably deny claims when there are one or more of the following problems with the beneficiary:
- Beneficiary dispute
- There is no beneficiary designation on file.
- The beneficiary was changed after a divorce.
- The beneficiary of the policy is a minor.
- The insured did not name a spouse as a beneficiary in a community-property state.
- The life insurance policy was included in a will or willed to an estate.
- The beneficiary was not updated after a significant life change.
- The beneficiary is not a specific person, such as “children” or “relatives.”
- The insured named only a primary beneficiary and no secondary beneficiary
Claim Delayed or Denied Because the Death was a Homicide
In most cases, life insurance policies should pay out in the event of homicide. However, there are specific circumstances in which insurance companies could deny a beneficiary’s claim in the event of the insured’s murder.
For instance, if the beneficiary is under investigation for the homicide of the insured, then the beneficiary will not receive the death benefit until cleared of any involvement in the insured’s death. Additionally, life insurance companies will rarely pay out if the insured was murdered while participating in unlawful/criminal activity.
We had one case where the insured was murdered. The insured was a drug user, and the beneficiary’s claim was denied based on misrepresentation. We successfully argued that the agent did not probe into the insured’s drug use, that the insured was never asked whether he was treated for drug abuse, and that drug abuse had nothing to do with the cause of death. Our client was paid in full.
If Your Claim For Death Benefits was Denied, Do Not Take No for an Answer!
If you believe your life insurance or AD&D claim has been unlawfully delayed or denied, don’t hesitate to contact an experienced life insurance beneficiary lawyer for a free case evaluation. We get our clients paid!