The primary purpose of life insurance is to protect family members financially after their loved one’s death. However, a life insurance policy is not offering guaranteed protection. Even if they are valid, legally binding contracts, they are usually filled with loopholes that insurance companies can leverage to not pay out the benefits.
Generally, the insured policy owner pays premiums to the insurance company in return for its promise to pay a certain amount of money to the beneficiary after his death. When the insured person dies, the beneficiary has the right to submit a claim with the insurance company. Read how to file a life insurance claim for benefits as well as how long you have to claim it.
If your life insurance company won’t pay, we can help. After years of practice, we recovered millions of dollars in denied insurance claims. Call 888-510-2212 to get a free consultation with one of our life insurance attorneys.
Can Life Insurance Companies Deny Claims?
In many cases, insurance companies keep their promise and pay the benefits to the beneficiary after the insured’s death. Read our blog post to learn how long should it take to get a life insurance check.
Very often, however, life insurance claims get denied for a variety of reasons.
A delayed claim is a claim that has not been paid or denied after all the necessary documents were submitted to the insurer. Beneficiaries need to know that unless they take action, a life insurance claim may be delayed for as long as several years.
In other words, life insurers do have the right to delay or deny a claim.
10+ Reasons When a Life Insurance Claim Is Denied (or Delayed)
Why would a life insurance claim be denied?
Some of the excuses the insurance companies use in denying claims are not legitimate but designed to convince a beneficiary that his claim is denied for a valid reason.
Denial letters drafted by experienced claim examiners often quote policy provisions and exclusions that are difficult to read and understand because they are full of legal terms and ambiguous definitions. Often, claim examiners who are not attorneys will quote a law or a state statute in their denial letter and will convince the beneficiary that his claim is rightfully denied under the law.
Such letters should never be accepted as the final verdict as they often misinterpret laws and quote statutes not applicable to the beneficiary’s case.
After years of experience in the field, we’ve put together a list with the most common reasons why and when life insurance companies won’t pay beneficiaries out, either by denying or delaying the claims:
1. The death happened during the contestability period
If an insured dies within the first two years from the date a life insurance policy becomes effective, the insurance company has the right to contest the policy.
When an applicant applies for insurance, he is asked to complete a life insurance application that requires information about age, weight, income, health, hobbies, criminal history, and so forth. Contestability means to investigate the deceased insured’s medical records and background information.
If, while contesting the policy, the insurance company finds information not reflected on the application, it may deny coverage. Any misleading or false information is considered “material misrepresentation”. For example, if failing to mention smoking habits, a history of alcohol or drug use or pre-existing chronic ailments such as depression or high blood pressure can be used as claim denial reasons. The insurance company may refuse to pay out the death benefit, even if their death had nothing to do with the misrepresentation.
Only material misrepresentations (those that affect risk) can result in a policy cancellation. Many insurance companies use contestability as an opportunity to deny a valid claim even if a misrepresentation/non-disclosure on the application is not material.
However, if death after the contestability period and their background information is not accurate, usually, misrepresentation won’t be an issue. It becomes one if the policy was purchased for the benefit of the beneficiaries – the covered individual committed suicide or the insurance was bought in a plot to murder the insured and collect the money. Insurers deny such claims after the contestability period has ended.
See how we solved cases involving material misrepresentation or deaths during the contestability period:
Here’s how our attorneys have won cases involving claim denials due to beneficiary designation:
- Delayed claim due to beneficiary designation
- Denied claims due to beneficiary dispute in a murder-suicide case
- Delayed claim due to contestability
- Delayed claim due to contestability check
2. The type of death wasn’t covered in the policy
Every life insurance contract has several exclusions that describe situations that the policy does not cover. These exclusions are worded very carefully by insurance companies so as to encompass many possible scenarios that they can use as reasons to deny life insurance policies.
Many exclusions are ambiguous and many, when taken together with other exclusions, cancel each other out. Still, life insurance companies use them routinely and very often to deny claims.
Here are some of the most common exclusions life insurers invoke as reasons to refuse to pay out death claim benefits:
2.1 Death due to suicide
Life insurers may contest and deny a claim if death occurred due to suicide within the two-year constability period. Along with the suicide provision or clause in a policy are meant to discourage people from purchasing life insurance when contemplating death. However, suicide doesn’t invalidate a life insurance policy – beneficiaries may receive a refund of the premiums that have been paid.
As a rule of thumb, if the policyholder passed away during the contestability period, the death benefit may not be paid. But most people don’t know that they can contest the denial by submitting a police report that describes the cause of death. Furthermore, most insurers no longer consider doctor-assisted euthanasia to be “suicide”.
2.2 Death due to drug or alcohol abuse
Life insurers often exclude deaths due to alcohol or drug abuse from coverage since they deem them as self-inflicted. However, this exclusion can be misleading since it can cover any cause of death that occurs while under the influence of illegal substances, even if the cause of death is not related to the use of such substances.
We discussed whether life insurance covers drug overdose in our article about denied claims due to drug exclusion.
2.3 Death due to homicide
With a few exceptions, life insurance policies do not cover murders. For example, when the beneficiary is suspected of murdering the insured. In this case, they won’t receive the benefits until they’re no longer under investigation. Similarly, insurance companies may deny a claim if the policyholder was murdered while participating in illegal/unlawful/criminal activity.
2.4 Death due to illegal activities
Most life insurance companies include illegal activities on their exclusion list. The activities vary from driving under the influence of alcohol, injury or death occurred during a car accident due to speeding or not wearing a belt, participating in illegal protests, illegal consumption of drugs or alcohol, and more. If the insured passed away in any of these conditions, insurers may deny the death benefit claim.
2.5 Death due to extreme and dangerous hobbies and activities
Usually, policies do not cover death due to hazardous activities, recreational or otherwise. These can include anything from bungee jumping to skydiving or scuba diving. Furthermore, if your loved one was frequently participating in such extreme hobbies or adventure sports but failed to mention when purchasing the policy, insurers may consider it material misrepresentation and deny your claim.
Generally speaking, only specified activities are excluded and could void the policy. For instance, if the policy excluded base jumping but your loved one died in a hang-gliding accident that was not listed as an exclusion, you are still entitled to the benefits.
2.6 Death due to acts of war
The war death exclusion is not as common as it once was, but some policies still list it. It’s not intended to exclude soldiers, but to deny claims for civilians who are killed in a war or a military conflict.
3. The employer failed to submit a waiver of premium
Group life insurance coverage is very common.
Whenever employees choose to participate in their employer-provided life insurance programs, they enroll into group life insurance plans. Many of such group plans provide coverage not only to the employees but also to their qualified dependents.
The employer’s role is often very important in explaining the benefits to its covered employees.
The human resources department is often responsible for acting as an intermediary between the life insurance company and insured employees and has a duty to provide accurate information regarding benefits.
Unfortunately, often, an employer will misrepresent information about life insurance coverage to its employees which can result in denied benefits after the employee’s death.
Our life insurance attorneys always advise clients to review group life insurance policies carefully when electing coverage. Additionally, whenever there is a change in the group plan, it is a good idea to make a note of that change and review the policy and eligibility requirements periodically.
Unfortunately, in many cases, employees are never provided with a copy of their life insurance policy and have only a vague idea about what constitutes a qualified loss or who is considered a qualified dependent.
In addition, many employees do not know what their eligibility requirements are. A likely outcome of not knowing what a policy covers is an unfortunate situation where a group life insurance claim is denied after the insured’s death.
A very common example of a denied group life insurance claim is a situation where a disabled employee is assured by his employer that he does not need to pay premiums on his group policy while on disability and that his life insurance coverage will stay in effect during his disability.
The employer then fails to submit all the necessary documents to the insurance company which then use to make the life insurance void. The law protects beneficiaries from unfairly denied claims in such situations and benefits can still be recovered through the legal process.
A denied group life insurance claim is handled differently from other claims. In many cases, a group life insurance claim is controlled by ERISA, which governs all employee welfare benefit plans. ERISA usually trumps conflicting state laws and offers many protections for plan participants.
4. Policy premiums were not paid, leading to a lapse in payment
Usually, a life insurance policy is only active for as long as premiums are paid. When no premium is made when it is due, a policy may lapse/terminate.
Denied claims due to lapse are very common and insurance companies often use nonpayment of premiums as a reason to deny a claim even when a claim should be paid. As a beneficiary, you have the right to know whether the insurance company sent premium-due notices to the correct address and whether the notice clearly warned the insured of the impending lapse.
Here are a few cases involving denied claims due to lapsed policies that we successfully handled:
- Denied life insurance benefits due to lapsed policy
- Denied life insurance benefits for failure to pay premiums
- Denied life insurance benefits based on policy lapse due to non-payment of premium
- Denied life insurance proceeds based on a lapse in policy – We recovered $100,000 after the appeal
- Denied claim benefits proceeds due to lapsed policy during the contestability period – We recovered $1 million for our client
- Denied life insurance benefits due to increased policy premium lapse
5. There is no beneficiary designation on file
Another reason to be denied a life insurance claim is if the insured failed to name a beneficiary. Every policy has provisions regarding who should get the proceeds if there is no designated beneficiary.
When a beneficiary is not named, an insurance company will pay the proceeds either according to the law of the state where the policy was taken out or according to the policy terms. Such claims may result in lengthy delays and denial as insurance companies may pay the benefits to the wrong person.
We wrote more on this in our article about what happens to life insurance with no beneficiary.
6. The beneficiary was changed after a divorce
Many state laws automatically revoke a former spouse as a life insurance beneficiary on a policy.
However, these laws have many exceptions. Generally, they apply only to state law claims and should not revoke beneficiaries in cases controlled by federal laws. Claim examiners working for life insurance companies may not know all the intricacies of such laws and interplay between federal and state statutes, therefore they can easily invoke this as reason to deny your claim.
During divorce, life insurance also discusses child support actions. In many cases, a parent is ordered by court to maintain his children as beneficiaries on his life insurance policy.
If the parent later violates the court order and changes beneficiaries, a life insurance claim filed by the children may be denied. If your case involves a court order and a subsequent beneficiary change after divorce, you may need to speak with an attorney before the claim is filed.
As you see, there may be many different ways an insurance company can deny your claim. A denied life insurance claim does not mean that a beneficiary is out of options.
Insurance companies employ many techniques that may result in delayed life insurance claims.
If you allow the insurance company to delay a claim indefinitely without an explanation, you may risk getting a denied claim in the end. If an insurance company is delaying a claim, it must provide the beneficiary with its reason for doing so. If beneficiaries don’t know the reason for their claim delay, they must speak with a life insurance attorney to understand the issue.
Some of the reasons why life insurance companies are not paying the benefits and delaying claims are:
7. The beneficiary on the policy is a minor
When an insured lists a minor child as a beneficiary, a life insurance claim may be delayed, because a minor child cannot receive the proceeds without a guardian.
A life insurance lawyer will help you expedite payment of your claim by making sure proper guardianship documents are filed.
8. The insured did not name a spouse as a beneficiary in a community-property state
In a community-property state, a spouse may claim at least half of the proceeds from the life insurance policy on a deceased spouse. A life insurance lawyer will help you understand your rights.
If you’re interested in finding out more, we write a complete guide about a spouses’ rights to life insurance benefits.
9. The life insurance policy was included in a will or a trust
A life insurance policy is a contract and is not controlled by a will. However, many people include their life insurance policies in a will, which often results in life insurance claim delays.
10. The beneficiary was not updated after a major life change
When people divorce, marry, have children, etc, they usually want to change beneficiaries on their life insurance policies.
If they fail to do so, several people may have claims to the same policy proceeds after their death. If this is the case, a claim may be delayed because an insurance company is preparing to file an interpleader.
11. The insured named his “children” or “relatives” as beneficiaries
When a beneficiary is not a specific person, but a category or a group of people named collectively, it may result in a life insurance claim being delayed.
12. The insured named only a primary beneficiary
If a primary life insurance beneficiary is not available (predeceased the insured or is revoked under the law) the proceeds are usually paid to a contingent (secondary) beneficiary. If the secondary beneficiary died before the insured, then the death benefit goes to the final beneficiary.
If no contingent or final beneficiaries are named, the insurance company may delay paying the claim while determining who should receive the payout.
Our lawyers wrote in-depth about such cases in our blog post about what happens when the beneficiary of a life insurance policy is deceased.
Here’s how our attorneys have won cases involving claim denials due to beneficiary designation:
- Delayed claim due to beneficiary designation
- Denied claim due to beneficiary dispute in a murder-suicide case
List of Life Insurance Companies Not Paying Claims
All insurers are interested in finding a loophole to deny or delay death benefits claims. With so many reasons they can use so, you shouldn’t be surprised that there are many life insurance companies that refuse coverage.
Here’s a list with life insurance companies that deny or delay claims:
- American General (AIG)
- Liberty Mutual
- Lincoln National
- New York Life & AARP
- Northwestern Mutual
- Primerica Life
We’ve successfully collected death benefit claims from these companies and many more. See the entire list of insurers we went against here.
What to Do If Your Life Insurance Claim is Denied or Delayed?
Every delay or denial should be reviewed by an experienced life insurance attorney and contested if it appears that a claim was wrongfully delayed or denied. You can read our blog post to learn more about what appeals entail and how to handle them.
If you find yourself in one of the situations described above or you simply need advice, a free consultation to help you assess your case will always be available to you at our firm. Call us at 888-510-2212 to consult with one of our lawyers.