10+ Reasons Life Insurance Won’t Pay Out: Why Companies Deny Claims & How to Fight Back
Life insurance is designed to provide financial protection to families after the death of a loved one. When a policyholder pays premiums for years, their beneficiaries reasonably expect the insurer to pay out the death benefit. Unfortunately, life insurance companies do not always keep their promise. Even though life insurance policies are legally binding contracts, they are also filled with exclusions, loopholes, technical rules, and laws that insurers often use to delay, deny, or reduce payouts.
Many beneficiaries only discover these complexities when they file a life insurance claim and are unexpectedly denied. Understanding why life insurance won’t pay out—and knowing what to do when it happens—is essential for protecting your rights and obtaining the benefits your loved one intended for you.
Below, our life insurance attorneys explain the most common reasons life insurance companies deny claims, how these denials work, and what beneficiaries can do to challenge them.
If your claim was denied or delayed, call our life insurance lawyers at (888) 510-2212 for a free consultation.
Can a Life Insurance Company Refuse to Pay Out?
Yes. A life insurance claim can be:
Paid
Denied
Delayed
A delayed claim is one where the insurer does not issue a decision despite having all required documents. Delays can last months—or even years—unless the beneficiary takes action.
Insurers not only can deny claims—they do it frequently. Denials often rely on complicated policy language, misleading interpretations, and legal jargon designed to discourage beneficiaries from challenging them.
This is why every denial should be reviewed by an attorney.
Top Reasons Life Insurance Won’t Pay Out
Below are the most common excuses insurers use to deny life insurance claims—and why many of them can be overturned.
1. Material Misrepresentation on the Application
One of the leading reasons life insurance companies deny claims is alleged misrepresentation during the application process. This occurs when the insured:
Failed to disclose medical conditions
Understated weight
Failed to report smoking or alcohol use
Didn’t mention prescription medication
Failed to disclose criminal history
Understated income or employment details
During the two-year contestability period, the insurer has the right to examine medical records and background information. If they find inconsistencies, they may declare the policy void.
However, many denials are wrongful. In most states, a misrepresentation must be material—meaning it must have contributed to the death or affected the insurer’s decision to issue the policy. Many insurers deny claims even when the misrepresentation is unrelated to the insured’s death.
2. Suicide Within the Contestability Period
If the insured dies by suicide within two years of purchasing the policy, most insurers invoke the suicide clause, denying the death benefit but refunding premiums.
However:
Doctor-assisted euthanasia is often not considered suicide.
Accidental self-harm is not suicide.
Some insurers wrongly classify unclear deaths as suicide.
Beneficiaries can challenge these denials with evidence such as police reports, witness statements, and medical records.
3. Death Due to Drug or Alcohol Use
Many policies exclude deaths caused by intoxication or illegal drug use. Insurers often apply this exclusion broadly, even when drugs or alcohol did not cause the death—only appeared in a toxicology report.
These denials can be overturned when:
The cause of death was unrelated
The exclusion is ambiguous
The insurer misapplied state law
4. Homicide
Life insurance is typically paid in homicide cases unless the beneficiary is a suspect. Insurers may delay payment until police investigations conclude.
However, if the insured died while engaged in illegal activity (such as armed robbery or violent crime), insurers may deny claims under illegal activity exclusions.
5. Death During Illegal or Criminal Activity
Almost all life insurance policies include an illegal activity exclusion. Insurers may deny claims for deaths occurring during:
DUI accidents
Driving while intoxicated
High-speed crashes
Drug possession
Illegal protests
Criminal altercations
However, insurers often overreach—denying claims where the activity was not criminal or when the exclusion doesn't apply to the type of policy.
6. Participation in Dangerous Activities
Many policies exclude dangerous or extreme activities such as:
Skydiving
Scuba diving
Bungee jumping
Rock climbing
Aviation (non-commercial)
But insurers sometimes misuse this exclusion. If the dangerous activity is not explicitly excluded, they must pay.
7. Death Due to Acts of War
Some older or specialized policies exclude deaths caused by acts of war or terrorism. This exclusion rarely applies today but still appears in some contracts. It is not designed to exclude military deaths but may apply to civilians in war zones.
8. Employer Error in Group Life Insurance Policies
Group life insurance is often mishandled by employers. Common employer mistakes include:
Failing to forward documents
Giving incorrect eligibility information
Promising coverage that doesn’t exist
Failing to submit waiver-of-premium forms
Wrongfully terminating group coverage
If the employer’s mistake caused the denial, beneficiaries can often recover benefits under ERISA or state law.
9. Policy Lapse for Nonpayment of Premiums
One of the most frequent—and most wrongful—reasons for denial is policy lapse. Insurers claim coverage ended because the insured missed a premium payment.
But a lapse is only valid if:
The insurer sent proper lapse notices
Notices were mailed to the correct address
Grace period laws were followed
Required warnings were provided
Most beneficiaries do not realize that wrongful lapses can be appealed—and often overturned.
10. No Beneficiary Named
If the insured failed to name a beneficiary or the beneficiary died first, insurers must follow state laws. This often creates delays and disputes—but not necessarily denials. An experienced attorney can help determine who should legally receive the payout.
11. Failure to Update Beneficiary After Divorce
Many states automatically revoke ex-spouses as beneficiaries—unless the policy is governed by federal law (such as ERISA), where state rules do not apply.
This is one of the most misunderstood areas of life insurance law. Beneficiaries denied because they are ex-spouses can frequently recover the payout.
Reasons Life Insurance Claims Get Delayed (Not Denied)
A claim may be delayed for reasons such as:
Naming a minor as beneficiary
Community-property disputes
Wills or trusts conflicting with policy terms
Multiple beneficiaries in a category (e.g., “children”)
Beneficiary predeceased the insured
Beneficiary is under criminal investigation
Delays must be justified. If the insurer will not give you a reason, contact an attorney immediately.
Life Insurance Companies Known for Denying Claims
Some insurers are more aggressive in denying or delaying claims, including:
AIG
Prudential
Lincoln National
New York Life / AARP
Transamerica
CIGNA
Liberty Mutual
Northwestern Mutual
Primerica
Unum
We have successfully recovered benefits from all of these companies.
What to Do if Your Life Insurance Claim Is Denied
Never assume a denial is final. Every denial must be reviewed to determine whether:
The insurer misapplied the law
The policy exclusion applies
The lapse was valid
The contestability review was proper
The beneficiary rules were followed
An attorney can gather evidence, file a strong appeal, and fight for your rights.
Get Help With a Denied Life Insurance Claim
If your life insurance claim was denied or delayed, you are not alone. Our life insurance lawyers have recovered millions for families nationwide. We offer:
Free consultations
No win, no fee representation
Experience with every major denial reason
Call (888) 510-2212 to speak with a life insurance attorney today.
