How to Deal With Life Insurance Claim Denial
Life insurance claim denial can be a terrible experience if you are a beneficiary trying to stake a claim for receiving a life insurance policy payout. Many beneficiaries assume that if and when the time is right, as long as the insured's policy was in force, the claim will be paid in short order by the life insurer. This is, in fact, typically how it works, and strong and well-established life insurance companies will typically pay out claims in a very timely manner--within two weeks and often in just several days.
But, you should never make the mistake of thinking that life insurance companies don't do any kind of investigation before they pay out a claim. They aren't going to just throw away their money in the event of something like insurance fraud. They need to see documentation of proof of the insured's death, and that means that as a claimant you'll need to present them with a copy of the death certificate and the insurance policy. Truth be told, if the deceased had a policy with a good life insurance company and you can present the proof of their death, the company will be able to look up the policy number in their databases and, as long as there is no reason to possibly deny the claim, they will probably pay you even if you've lost the policy. But once again, life insurance companies aren't going to be taken in by hucksters; and let's remember, their money is largely that of their clients, who have all agreed to pay premiums to pool resources against risk.
So, why might a life insurance company deny your claim and refuse to pay you? Well, if you haven't got the necessary documentation, they could tell you that they won't pay you. You should try to have the policy (or policies). You will also need the copy of the death certificate and personal ID. Now, if the death of the insured happened in two years or less from the time the policy was issued, the death certificate you get from the funeral home, morgue, or hospital might not be enough to convince them. This is because virtually every life insurance policy has a two-year exclusion clause with regards to suicide--that is, if the insured committed suicide within two years after the policy was issued, the insurance company doesn't have to pay the claim. The reason for this essentially universal life insurance industry practice is to prevent people who are planning on suicide and/or the potential beneficiaries who may be maliciously planning on that person's suicidal tendencies for their own gain from basically ripping off the insurance company and the company's clients. So, if a person dies within two years or less after they get their policy, the insurance company is probably going to scrutinize that death far more closely. Even if this does not result in a denied claim, it could very well delay the payout.
But the most prominent reason why a life insurance company denies a claim is on grounds of "material misrepresentation". It is state law that governs insurance practice, but in the great majority of states material misrepresentation clearly means that the insured answered a question on the insurance application which, if that question had been answered truthfully, should have resulted in the insurance company denying insurance coverage, either in the amount applied for or entirely.
A material misrepresentation can either be a lie or a "sin of omission". It might include falsified application information on:
* Use of tobacco
* How often and how much you typically drink alcohol
* Employment and/or employment history
* Income level
* Lifestyle
* Questions about personal health and/or medical history
If you are applying for life insurance, just tell the truth, the whole truth, and nothing but the truth. You buy life insurance to protect those you care about. If you really care about them, think about them when you are applying and don't jeopardize their chances of getting their claim paid in the future.