People purchase life insurance policies to protect their families and dependents in the unfortunate event of their death. Life insurance policies are valid, legally binding contracts between policyholders and life insurance companies. So, why is the life insurance company not paying out?
These are the sixteen most common reason life insurance companies deny claims:
- Nonpayment of Premiums
- Death during the Contestability Period
- Misrepresentation on Application
- Employer Failed to Submit a Disability Waiver of Premium
- Problems with the Beneficiary
- Policy was included in a Trust or a Will
- Denials Due to Suicide Exclusion
- Policy Included a Drug or Alcohol Exclusion
- Death Due to other Policy Exclusion
- Death Due to Act of War or Terrorism
- Death Resulted from Extreme or Dangerous Activities
- Death Due to Homicide
- Death While Living or Traveling Abroad
- Policyholder Dies Committing an Illegal Act
- No Insurable Interest
- New or Replacement Policy
Just because your claim was initially denied does not mean you do not have a valid claim. You must fight the life insurance company when they deny your claim. Call our experienced life insurance lawyers at 855-553-9010 to discuss the specifics of your life insurance policy and learn about your options – free of charge
Remember, life insurance companies only make money for their shareholders when they collect premiums and deny or delay paying valid life insurance claims. Here are the sixteen most common reasons life insurance won’t pay out.
1. Nonpayment of Premiums
When the life insurance premiums are unpaid, life insurance coverage lapses, the policy terminates, and claims for death benefits get denied. However, our experienced life insurance lawyers have gotten many beneficiaries paid under these circumstances, especially when nonpayment of premiums is not the policyholder’s fault.
When you buy a life insurance policy, the insurance company’s obligation to pay out is contingent on the policyholder having paid the premiums. If you forget to pay, the insurance company typically provides 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 “lapses,” 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.
Often, nonpayment of premiums is not the policyholder’s fault. For example, the life insurance company may not have sent the legally-required notices of impending lapse, or cannot show that the policyholder received them.
Lapse in Coverage because Employer Stops Paying Premiums
Sometimes policy lapse and termination happens 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 Out on Disability
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. The disabled employee may be eligible for waiver of premiums due to disability and their employer should provide them with that application.
Lapse in Coverage Because the Employee Was Unable to Convert the Policy
When an employee leaves a job with group life insurance, they have the option to convert that coverage to an individual policy. Unfortunately, not all employers effectively administer their group life insurance plan, and either the necessary paperwork is not given to the employee or that paperwork is not properly completed or filed with the life insurance company.
2. Death During Contestability Period
In most states, the first two years of a life insurance policy are considered the “contestability period.” If the policyholder dies shortly after purchasing life insurance during the contestability period, the life insurance company has the right to review and fact-check information on a life insurance application for accuracy. They perform a full investigation of the policyholder’s medical records and any other information requested on the application.
If the life insurance company finds any false statements or omissions, they have the power to retroactively cancel the policy and refund premiums instead of paying the beneficiaries’ claims for death benefits.
Unfortunately, this is a common tactic among life insurance companies, even when the misrepresentation in question is unrelated to the insured’s death. All too frequently, otherwise valid life insurance claims are denied due to an innocent mistake on the application.
Do not take no for an answer! Our life insurance lawyers investigate alleged misrepresentation and are often able to get our clients paid. 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, did not know they had a heart condition, and could not have disclosed an unknown heart condition.
Death Due to Self-Inflicted Injuries During the Contestability Period
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 clause deters people from buying policies with the intention of committing suicide shortly afterward, thereby leaving large life insurance benefits for their family members.
Know that if there is even a possibility that the policyholder died from self-inflicted injuries, the life insurance company will probably deny your claim. Call us – we investigate and may be able to show that the cause of death was something else, or that the policyholder did not intend to harm themselves.
3. Misrepresentation on Application
Life insurance companies frequently rescind policies and deny claims for death benefits due to material misrepresentation on the part of the policyholder, for example, if the policyholder failed to disclose:
- Past or present health conditions,
- Past or present medications,
- Past surgeries,
- Participation in activities that the insurance company deems dangerous,
- Financial background,
- Criminal background,
- Past or present lifestyle habits such as tobacco use, alcohol use, or drug use.
If you or someone you know is struggling with alcohol or drug abuse call the Substance Abuse and Mental Health Services Administration (SAMHSA) hotline at 1-800-662-HELP (4357) for free and confidential help, 24 hours a day.
If there is false information on your application for life insurance or medical questionnaire, the life insurance company will deny your beneficiaries’ claims despite you having paid premiums all those years. Call your life insurance company to correct any false information and update your information in order to get your beneficiaries paid.
Agent Error or Omission
We have gotten many client beneficiaries paid when their claim was denied because the life 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.
Knowingly Committing Fraud
In most states, a policyholder’s innocent mistake on a life insurance application does not rise to the level of fraud, and the life insurance company should pay beneficiaries’ claims. The life insurance company must show that the policyholder knowingly completed their application fraudulently with the intent to procure coverage or to pay less in premiums.
4. Employer Failed to Submit a Waiver of Premium
If an employee is disabled and out of work, and is covered by group life insurance through their employer, their employer must submit a disability waiver of premium to the life insurance company. If they do not, and the policy lapses due to nonpayment of premiums, the life insurance company will deny the disabled employee’s beneficiaries claims for the death benefit.
We get our client’s claims paid under these circumstances because the lapse was not the policyholder’s fault.
5. Problems with the Beneficiary
Insurance companies invariably deny or delay paying claims when there are one or more of the following problems with the beneficiary:
- There is a life insurance beneficiary dispute.
- There is no beneficiary designation on file and the life insurance payout must go through probate.
- A life insurance beneficiary change was forged or fraudulent.
- The beneficiary changed just before death.
- The beneficiary was not updated after the primary life insurance beneficiary died.
- The life insurance policy was a marital asset and the spouse was not named.
- The beneficiary did not change after divorce in a revocation-upon-divorce state.
- The policyholder’s spouse was not a beneficiary in a community-property state.
- The beneficiary changed after divorce contrary to a family court order.
- An irrevocable beneficiary changed.
- Federal ERISA law governs group life insurance through the insured’s employer, overriding state law regarding beneficiaries
- The beneficiary of the policy is a minor.
- The beneficiary is not a specific person and vague, such as “children” or “relatives.”
6. Policy Was Included in a Will or Trust
If a life insurance policy was included in a will and the policyholder’s heirs are different from the life insurance beneficiary designation, this may spark a beneficiary dispute. The same may occur if the beneficiaries of a policyholder’s trust are different from their life insurance beneficiaries.
If the policy names a trust for a minor child or a special-needs child as beneficiary, the policy pays out to that trust.
7. Claim Denial Due to Suicide Exclusion
If a life insurance policy has a suicide exclusion, they will deny beneficiary’s claim for death benefits if the policyholder died from self-inflicted wounds. Suicide clauses differ depending on what state’s law applies to the policy but commonly provide that if the policyholder commits 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 policyholder 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 policyholder died due to auto-erotic asphyxiation. The autopsy stated that the cause of death was accidental, as the policyholder had laid out clothing for the next morning. The insurance company had the burden of proving that the policyholder “purposefully injured himself” (the wording of the exclusion) They could not as there was evidence the insured intended to survive, and we got our client paid.
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.
If you or someone you know is struggling with thoughts of suicide, call the National Suicide Prevention Hotline at 1-800-273-8255 to access their national network of local crisis centers that provide free and confidential emotional support to people in suicidal crisis or emotional distress 24 hours a day, 7 days a week.
8. Policy Included a Drug or Alcohol Exclusion
Many policies have exclusions that will deny claims when the policyholder died due to illegal drug use or overdose on prescription drugs. Some policies also exclude and deny life insurance claims for death related to alcohol use.
Life insurance companies often apply these exclusions and deny claims when marijuana or some other drug was found in the toxicology report. Life insurance companies also will apply the exclusion in cases involving heroin overdoses, when someone took too many prescription pain pills or other medication, or died from alcohol poisoning.
Does life insurance cover drug overdoses? Does life insurance cover death from alcohol? Sometimes. Some states have laws that protect life insurance policyholders who are prescribed narcotics or who are deemed disabled due to addiction to drugs or alcohol.
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 policyholder had “acute amphetamine intoxication” so our client’s death benefit claim was initially denied. However, ultimately it was determined that the policyholder 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.
If you or someone you know is abusing drugs or suffers from drug addiction, call the Substance Abuse and Mental Health Services Administration (SAMHSA) hotline at 1-800-662-HELP (4357) for free and confidential help, 24 hours a day.
9. Policy Lists Other Exclusions
Every policy has a set of exclusions, and they differ from insurer to insurer. If there is any chance the policyholder’s death was excluded from coverage, the life insurance company will leap at the chance to deny their beneficiary’s claim.
This is especially the case in Accidental Death & Dismemberment life insurance policies and riders (AD&D), in which life insurance companies 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 for pilots.
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.
10. Death Due to Act of War or Terrorism
Most policies have an Act of War exclusion allowing the life insurance company to deny claims connected to civilians killed in wars or acts of terrorism. This commonly applies 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.
11. Death Resulted from Extreme or Dangerous Activities
“Accidental Death & Dismemberment” policies (AD&D) are commonly sold to policyholders under the impression that if they die of a non-natural, “accidental” cause, a death benefit will be paid to his or her beneficiaries. However, it is common for life insurance companies to deny accidental death claims.
Life 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. Lie insurance companies then deny claims based on a failure to fulfill that list of provisions. Note that AD&D policies never cover self-inflicted death or health-related deaths, since both of these scenarios would not qualify as an “accident.”
We recently settled a matter for our client where the policyholder 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 benzodiazepine 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 foreseeability 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!
12. Death Due to Homicide
In most cases, life insurance policies should pay out in the event of homicide. However, there are specific circumstances in which life insurance companies deny a beneficiary’s claim in the event of the policyholder’s murder.
If the beneficiary is under investigation for the homicide of the policyholder, then the beneficiary will not receive the death benefit until cleared of any involvement in the policyholder’s death. If the death is under investigation, the life insurance company delays paying claims until all beneficiaries are cleared of suspicion.
We had one case where the policyholder was murdered. The policyholder 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 policyholder’s drug use while completing the application, that the policyholder was never asked whether he was treated for drug abuse, and that drug abuse had nothing to do with his cause of death. Our client was paid in full.
13. Death while Living or Traveling Abroad
Does life insurance cover overseas death? Perhaps. A policy may specify that if the policyholder dies 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 travel or live abroad.
Be advised that if you die while traveling abroad, the insurance company may delay paying on your beneficiary’s claim while they investigate your death.
14. Policyholder Dies Committing 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.
15. No Insurable Interest
Someone purchasing life insurance covering someone else must have an insurable interest in the insured. If they do not, the life insurance company will deny their claim for death benefits.
16. New or Replacement Policy
If the policyholder replaced their former policy with a new one just prior to their death and failed to check for possible new exclusions, the life insurance company may deny their beneficiaries’ claims for a surprising reason. Similarly, when a policyholder purchases new or replacement life insurance, the contestability period restarts, and the life insurance company is empowered anew to deny claims for inconsistencies or inaccuracies in their application or medical questionnaire.
Talk with a Life Insurance Lawyer About Denied or Delayed Claims
The experienced life insurance lawyers at Boonswang Law have gotten beneficiaries across the nation paid when the life insurance company denied their claims due to these common reasons, among other reasons.
Don’t 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 us for your free case evaluation. We get our clients paid!