Most people take out life insurance to be a safety net for their family. This amount can be used for anything from paying off any debt to being given as an inheritance. This article will discuss reasons life insurance claims could be denied.
According to Investopedia [Life Insurance Guide to Policies and Companies (investopedia.com)] life insurance is “a contract between an insurer and a policy owner. A life insurance policy guarantees the insurer pays a sum of money to named beneficiaries when the insured dies in exchange for the premiums paid by the policyholder during their lifetime”. The role of life insurance is of extreme importance in ensuring a better future for your family or your beneficiaries. However, it is not uncommon for some life insurance claims to be denied by the insurance company. To learn more and contest a denial of your life insurance claim speak to life insurance lawyers today.
Some common reasons why life insurance claims are denied include the following:
- Failure to disclose - one reason for a claim to be denied is based on what is applicable in a life insurance policy and that is full disclosure of the policyholder’s medical condition or other important information. Disclosing a medical condition is of great importance as it has a direct impact on an individual’s lifespan. In addition, a number of issues fall under important information such as if an individual enjoys and partakes in dangerous hobbies, for example, it is important for the policyholder to disclose that he or she enjoys and actively takes part in sky diving. This is important information because it makes up the basis to determine an individual’s life expectancy or mortality. Further, it is a strong deciding factor in the policyholder’s life insurance underwriting class. By the policyholder failing to disclose such information during the application process this action alone is deemed misleading or an omission of information. As a result, it affects the insurance company’s ability to charge rates accurately. Or if the issue at hand is a misrepresentation then the application gets approval when it ought to be denied. Therefore, it is important to disclose the following information on your application:
- medical history
- risky hobbies and behaviors ( mountain climbing, criminal records)
- dangerous occupations ( firefighters, pilots, military personnel)
- Failure to pay premiums - where the policyholder failed to pay his or her life insurance premiums it is possible that the policy may lapse as a result of non-payment. Therefore, it is important to pay monthly premiums as per your agreement. Or if you have fallen behind on payments fix the situation. However, this is dependent upon how far behind you have fallen in your payments; as most policies only give a grace period of between 30-31 days leeway. It must be noted that rules with regards to reinstating a policy vary from one insurance company and state.
- Outliving your policy - when term life insurance is held, there is a likelihood that the policyholder could outlive the term. If this occurs you may need to renew the policy at the end of the term. And you may be able to change from term life insurance to permanent life insurance.