You buy a life insurance policy to make sure your loved ones won’t be left without financial support after your death. However, life insurance carriers do deny claims every once in a while. As your insurance agent, we want you to understand why your life insurance claim could get denied so your loved ones are not faced with another difficulty at a vulnerable time. Here are some common reasons why life insurance companies may not pay out the benefits you purchased.
- You failed to disclose a medical condition or other pertinent information while applying for the policy. If you die within two years of purchasing your policy, the life insurance carrier can contest your beneficiaries’ claim. If, during this process, they find that you had a chronic medical condition that you didn’t disclose on your application, they can deny the claim. They also often require you to mention risky behaviors you engage in that could lead to an untimely death, and if those weren’t on your application, that can also result in the claim being denied. This can happen even if the death had nothing to do with these omissions.
- The policy you purchased does not cover the type of death that occurred. Every life insurance contract excludes certain types of deaths and will not pay out claims relating to those events. Some of the most common exclusions include suicide, substance abuse, dangerous hobbies, homicide, illegal activities, or acts of war.
- You were not clear on the specifics of your employer’s group life policy. Many employers provide group life insurance for their employees, and sometimes for qualified dependents as well. However, many employees only look at the basics of group policies, such as the benefit amount, and do not look at the full certificate of what is and isn’t covered, which can leave beneficiaries surprised when they go to file a claim. Sometimes even the HR department is not clear on the specifics of the policy, and sometimes they forget to submit premium waivers for employees on disability, which can nullify a life insurance claim if they later die.
- Unpaid premiums. Like most insurance policies, a life insurance policy is only active as long as the policyholder pays their premiums. If you fail to pay your premiums in a timely manner, the carrier will terminate your coverage, and your beneficiaries might only find out about this when they go to file a claim.
- You did not name a beneficiary or forgot to update your beneficiary. Make sure to name your beneficiaries when you purchase a life insurance policy, whether a personal policy of through your employer. And when beneficiary information changes, due to marriage, divorce, birth of a child, or death of a beneficiary, make sure to inform your life insurance carrier promptly. If you die without naming a beneficiary, the insurance company will pay out benefits according to the policy terms, but this delays the payout and can result in the benefit going to someone you did not intend to receive it.
- The beneficiary on the policy is a minor. Minor children cannot receive the proceeds of a life insurance policy without a guardian, so payouts to them can be delayed considerably.
- You outlived your term life insurance policy. Many life insurance policies are term policies, meaning they are only valid if you die before a certain age. If you want to continue your coverage past that age, the carrier might let you renew the policy, but the premium will certainly be higher. You may be able to convert your term life policy to a whole life policy, but you have to do so within a designated timeframe, before the end of the original term.
Make sure your beneficiaries know what to do if a life insurance claim they make gets denied. Keep the full certificate of your policy in a safe place, and have contact information for a life insurance attorney on hand to contest possible wrongful denials. At Kamm Insurance Group, we would be happy to discuss your life insurance needs so you can get the right policy for you and be 100% clear on what it does and does not cover so your beneficiaries aren’t left without benefits at an already-vulnerable time.