Key person life insurance (aka key man life insurance or corporate owned life insurance) is life insurance coverage on top executives, directors, partners, proprietors and key employees in a corporation.

The death benefit from a key man life insurance policy are paid directly to the corporation that took out the policy, since the business is the beneficiary under the key man life insurance policy.

Death of a key person in a corporation often causes a loss of income, business and opportunities. It may result in substantial business expenditures associated with hiring and training a new employee replacement.

Not surprisingly, having key man insurance coverage on highest paid officers and director is a standard procedure for many corporations that many investors now expect.

Since the very essence of key man life insurance coverage is to shield corporations from financial losses in the event of death of an executive, it is reasonable to expect the insurance company to honor a key man life insurance claim after it issues a policy and collects premiums from a corporation.

However, insurance companies routinely deny key man life insurance claims and refuse to pay for a variety of reasons.

The most common reasons for denying or delaying key man life insurance claims are contestable claims, application of life insurance policy exclusions, breach of policy provisions and fraud.

Fortunately, almost every state now has laws designed to protect corporations from the insurance company’s refusal to pay a key man life insurance claim and an experienced key man life insurance attorney will help a corporation determine whether its claim has been wrongfully denied or delayed and whether it can be recovered in court.

Contestability provision

Contestability is one of the most common reasons insurance companies use to delay and deny claims.

A contestable claim is a claim filed after the policy has been in effect for less than two years. The contestability provision is not unique to key man life insurance policies; it is found in almost every life insurance contract.

Under this provision, if a key person in a corporation  (insured) dies within the first two years after the date the business purchased the policy on him/her, the insurance company has the right to investigate the insured’s medical history, background and other personal information disclosed on the application.

If it finds out that some information was misrepresented or not disclosed, a key man life insurance claim will most likely be denied.

Not all claims are wrongfully denied

A key man life insurance lawyer will help evaluate your claim denied due to contestability and will advise you whether a corporation’s claim was denied for valid reasons.

Under the law, only material misrepresentations on the application can cause policy cancellations. Material misrepresentations on a life insurance application are non-disclosures and statements that affect the insurance company’s underwriting risk.

A key man life insurance attorney will investigate the facts of the denial, study the records and evaluate alleged misrepresentations to see if they were material to this particular insurance company.

If your key man life insurance claim has been denied, call our life insurance attorneys for help.

Call (888) 510-2212 for a free consultation.