If you have purchased a life insurance policy you likely believe that if you die, your insurance company will pay your family the amount of the policy. However, that is not always the case. Here are the most common reasons life insurance companies deny claims and what you can do to protect yourself.
1. Unpaid Premiums
If you have a life insurance policy and haven’t paid the premium, the company will deny any claim for death benefits. Ensure your policies are paid timely—you may wish to consider an automatic withdrawal each year so you don’t accidentally forget.
2. Material Misrepresentation
This refers to lying or omitting information on your application for life insurance. If you are not truthful on your application, the insurance company can deny your claim even if your death had nothing to do with your mistruth. For example, if you die in car accident, your insurance provider could deny coverage if you lied about being a smoker on your application. Consequently, it is important to disclose any “bad” facts about your personal history. You may pay a higher premium but your carrier will not be able to deny coverage for material misrepresentation. Common misrepresentations include lying about age, employment (especially high-risk professions), smoking, drinking, dangerous hobbies and medical history.
3. Insufficient Documentation
If you pass away, your family will need appropriate records to make a claim. Most importantly, they will need an original copy of the death certificate. Documentation from the funeral home will not be sufficient. An original copy of the death certificate can usually be obtained from your local health and human services division. While it is understandable that grieving family does not want to have to deal with this administrative requirement, it is a necessary task that will help ensure the claim is paid.
If an insurance company can show that the claim is fraudulent, they will deny it. Examples of fraud include taking out a policy on someone else’s name without their permission, making up a false identity then making a claim on that person’s “death” as well as faking a death.
In most cases, an insurance company will not pay a claim if the cause of death is suicide. Moreover, if the death was under suspicious circumstances, the insurance claim may delay payment while they investigate the cause of death.
6. Limited Policies
Some policies only cover death by certain causes, for example, accidental death. If you die from an illness, it is not covered. Therefore, it is important to review the type of policy you have to ensure it adequately covers your lifestyle.
If you are involved in a dispute with a life insurance company over death benefits we can assist you in evaluating your case. Please contact us at 702-333-1111.