In order for a life insurance claim to be paid, several requirements must be met: there must be valid coverage at the time of an insured’s death, a beneficiary must produce a certified copy of the death certificate and file a notice of claim, an insurance company must make sure exclusions do not apply, etc.
The most important requirement of all is the existence of valid coverage at the time of an insured’s death, because if there is no coverage at the time of death, no claim can be filed. An active policy at the time of death means that the policyowner paid the policy premiums on time and did not allow the policy to lapse (cancel without value).
When does a life insurance policy lapse?
A lapse happens when a premium payment is not received on the due date and during the grace period. The grace period is a time period (usually 31 or 60 days) which begins on the date a premium that was due was not paid.
Life insurance coverage usually stays in effect during the grace period. If an insured dies during the grace period, an insurer is obligated to pay the life insurance benefits to the beneficiary.
When the grace period begins depends on the due date and the frequency of premium payments. If a payment is not made on the premium due date and during the grace period, the policy will lapse. If an insured dies after a policy had lapsed, no benefits will be payable the beneficiary.
What if my life insurance claim was denied due to lapse?
Laws of many states provide wide protections to beneficiaries and policyowners by placing restrictions on insurance companies in regard to when a policy may lapse. Policyowners are not the only ones responsible for making sure the policy does not lapse. It is true that when people buy life insurance policies, they assume a responsibility of paying premiums.
However, insurance companies selling life insurance policies also assume a responsibility of acting in good faith. Acting in good faith means complying with the laws and regulations of the state where the policy was purchased.
In addition, some states place additional requirements on insurance companies. Such laws are designed to protect policyowners and beneficiaries from lapse, especially in situations when the insured is not able to receive a premium-due notice, when the insured is gravely ill, has moved to another address, is travelling or is incapacitated.
What you need to know is that not all claims are denied correctly and a life insurance claim denied because the policy had lapsed may still be recovered.
A life insurance lawyer experienced in collecting denied life insurance claims based on lapse will help you determine whether you have a valid claim. A lapsed policy maybe reinstated if it was wrongfully treated as lapsed by an insurer.
Policyowners are not the only ones who have duties under a life insurance contract and laws. Life insurance companies have certain duties too.
First, a life insurance company must send a policyowner a premium-due notice to the correct address. Keeping an updated record of the policyowner’s correct address may seem easy.
Still, hundreds of life insurance claims get denied routinely, because an insurance company sent a premium-due notice to an insured’s old address or to the wrong address. Second, a life insurance company has a duty to send a policy lapse notice to the policyowner.
Our life insurance lawyers have handled many denied claims based on a lapsed policy where the insurance company sent a lapse notice not to a policyholder but to another individual.
If a policyowner does not receive a premium due notice, he may not even find out that a premium is due. This is especially true for situations where premiums are paid annually or where a premium is automatically withdrawn from an insured’s bank account.
Another duty an insurance company has is sending a policyowner a premium-due notice that complies with state laws. These statutes vary from state to state, but they are all designed to protect a policyowner and a beneficiary from a lapsed life insurance policy.
They require an insurer to send specific, clear lapse notices that tell a policyowner exactly when the premium is due and when the policy will lapse if a premium is unpaid.
When a life insurance claim is not paid because the insurance company claims the policy had lapsed, you need to speak to a life insurance lawyer to understand your rights. The insurer may have made a mistake in denying your claim, or there may be new laws in place which provide more protections to you as the beneficiary.
If your life insurance claim has been denied, call our life insurance lawyers now for a free consultation. Call (888) 510-2212.
Call (888) 510-2212 for a free consultation.