Beneficiaries are individuals who are named on life insurance policies as recipients of the benefits when the insured person dies. Most of the time, beneficiaries know they have been designated as the benefit recipients but they do not know their rights regarding policy information, time frame for filing a claim or interest payable on the claim.
After years of working with clients whose life insurance claims have been denied or delayed, we have outlined several important points life insurance beneficiaries should know about what information they are entitled to and what rights they have.
1. Right to know the policy amount
Unless the insured person shares the policy information with their beneficiary, the beneficiary may not even know how much the policy is. Without knowing the value of the policy many beneficiaries are left to file a claim and wait to receive a check.
For example, a beneficiary who is not a family member and did not maintain close contact with the insured does not know he had been named a beneficiary and does not have any information about the insured individual’s policy. Then he gets a call or a letter from the insurance company informing him that he is the benefit recipient and asking him to file a claim. When he asks the claims representative about the value of the policy, he is told that that information cannot be disclosed to him. It is not true.
After an insured person’s death, beneficiaries have the right to know the value of the policy. Sending a letter to the insurance company and the employer (if it is a group employer-provided life insurance) requesting to know the value of the policy is the first step.
2. Right to know how to file a claim
The right to know how to file a claim is a basic beneficiary right. It guarantees the beneficiary is informed about how to file a claim: how to complete claim forms, what additional documents to enclose, where to send the claim forms and the additional documents and within what time frame they are expected. Similarly, the insurance company must inform the insured of the claim review process and how long it will take to make a determination.
3. Right to know why the claim is delayed
In most cases, it should not take an insurance company more than 30 days to pay a claim. There are certainly cases that require more time. For example, if an insured died within the first two years of the policy effective date, the insurance company might take longer to get all the records. Similarly, if the death involves police investigation, an insurance claim is likely to be delayed until the investigation is over. Regardless of the reason for delay, beneficiaries have the right to know the reasons why the claim is delayed and how long it may take for the claim review to finalize.
4. Right to know why the claim is denied
If a claim is denied, the beneficiary needs to know why. We have represented many clients who had no idea why their claims had been denied when they called us. It is true that in many cases an insurance claims representative will send a simple letter stating the benefit is not payable without going into details. In another common scenario, a denial letter may say that the claim is not payable because the beneficiary is an ex-spouse. Without providing any information about a state statute revoking an ex-spouse or any other reasons for denial, such denials are vague and confusing.
For example, in a case where the insured was an ex-spouse to the beneficiary, a denial is not automatic. Laws differ from state to state, the policy may not even be controlled by that state law, or there may be special circumstances that would make the claim payable. Beneficiaries have the right to know specific reasons for denial, including statutes and documents the insurance company relied on in denying the claim.
5. Right to examine the documents used in reviewing the claim
If a claim is denied, beneficiaries have the right to examine the documents the insurance company used in denying the claim. Without examining these documents, beneficiaries will be left to take the insurance company’s denial as the final verdict. It should not be a secret what documents the insurer reviewed and relied on in denying the claim. For example, the insurance company made a decision to deny an accidental death claim due to drug exclusion. It sent a letter to the beneficiary stating that the insured had drugs in his system and his death is not covered by the policy for this reason.
The beneficiary in this case has the right to know what documents the insurer reviewed. Whether it is a toxicology report, a medical examiner’s report, a coroner’s report/autopsy, a police report or pharmacy records, the beneficiary can request and receive a copy of these documents. In some cases, beneficiaries are also entitled to a copy of the internal guidelines that the insurer used in reviewing the claim or a copy of the resume of the expert witness who provided his professional opinion that the insurer relied on.
6. Right to know how to file an appeal
If a claim is denied, beneficiaries need to know how to file an appeal. In ERISA cases, for example, an insurance company must provide appeal information at the end of the denial letter. The instructions must be very detailed and clear. A beneficiary in an ERISA denial must follow a specific time frame for filing an appeal. It is important to know the deadline for filing an appeal and where to send it. If a denial letter does not state this information, the beneficiary can request it in writing from the insurer.
7. Right to know they are beneficiaries on the policy after the death of the insured
In recent years, there have been many lawsuits against insurance companies that never informed beneficiaries of their right to collect life insurance benefits after the death of the insured policyholders. Beneficiaries may not know they have been designated as beneficiaries (if the insured does not inform or remind them), they may forget about it or they may not even know they have the right to collect. In these cases, after the insured person dies and no one claims the life insurance proceeds on his policy, it is the insurance company’s obligation to inform the beneficiaries of their right to collect the proceeds. If the insurance company fails to do so, it retains the benefit, and beneficiaries may find out about it years later, or never.
Beneficiaries have the right to know they have been designated as recipients on a life insurance policy and have the right to collect the proceeds even if the insurer failed to inform them in a timely manner.
8. Right to know how much interest will be paid
Usually, insurance companies must pay interest on claims that are delayed. Even if a claim is investigated for valid reasons, insurance companies must pay interest on the total amount of the claim. Unfortunately, not every beneficiary knows they need to ask about interest payable on their claim and insurance companies may get away with not paying it. The dates from which interest starts to accumulate and the amount of interest payable may differ from case to case. It is important to know that as a beneficiary you are entitled to know how much interest you will receive and when interest will start to accumulate.
As you see, beneficiaries to life insurance policies have many rights that protect them. If you have questions about any of these rights, you can address them to your insurance company or a life insurance attorney.