You have purchased life insurance to protect the financial future of your loved ones, but you have heard that insurance companies routinely deny claims. According to an expert life insurance attorney you can prevent or avoid the top five reasons a life insurance claim is denied.
1. Pay Your Monthly Life Insurance Premiums in Full and On Time.
By far, the most common reason a life insurance claim is denied is because the insured fell behind in paying his or her premiums, or the life insurance policy lapsed.
Insurance companies have little incentive to make things easy on your beneficiaries, and giving your insurer non-payment of premiums as a reason to deny the claim is negligence, plain and simple. If you’ve made the time and effort to acquire a life insurance policy, don’t jeopardize your beneficiaries’ financial future by being careless in paying your bills..
There are certain limited situations in which beneficiaries can still succeed in their claims despite nonpayment of premiums:
- You’ve become disabled, and your policy has a clause that waives premiums under those conditions;
- Your beneficiaries’ claims fall within the grace period applying to the premium payments you missed;
- The servicer of the policy made an administrative error that caused the claim to be denied.
If your beneficiaries’ claims are denied they should consult an experienced life insurance attorney to explore the applicability of these factors.
2. Be Scrupulously Honest on Your Life Insurance Application and Questionnaire.
All life insurance policies provide that if the insured lies on the application, the policy is void. For example, if the insured fails to disclose that he or she scuba dives, but actually does scuba dive, and then dies while scuba diving, this may void the policy.
If this is the case, your beneficiaries can try arguing that the non-disclosed behavior did not contribute to the death, however, this is an uphill battle to fight.
You should know that it is common for a policy to expressly exclude certain types of deaths, including but not limited to:
- drug or alcohol overdose
- act of war or terrorism
- death during some activity listed in the policy (sky-diving, mountain climbing and the like)
In these cases, a full investigation and autopsy are performed. You would be wise to have an attorney represent you and deal with the insurance company’s investigative team, as again, the insurance company has no incentive to find facts that favor paying on your claim.
3. Make Sure You Update Beneficiaries as Needed.
Problems determining who your beneficiaries are will at the very least delay payment. Such problems could even deny payment to someone you intended to be a beneficiary.
First, if you divorce, be sure to change your beneficiary to someone other than your ex-spouse unless maintaining insurance for his or her benefit is part of your property settlement agreement and divorce judgment.
If you’ve made a last-minute beneficiary change, be sure you tell people that affects to avoid dispute. If any of your beneficiaries cannot be found or have passed away, be sure you update your list of beneficiaries. Having more than one beneficiary is a good idea for these reasons.
4. Keep Track of Your Life Insurance Policy if You Change Jobs.
Many employers provide free group-term life insurance, and if yours does and you leave that job, your employer is under no obligation to continue paying the premiums and the policy may lapse.
When you leave that job, your employer will give you the opportunity to convert your group life insurance to an individual policy. If you fail to convert it, or if you made a mistake in the paperwork, there might have been no conversion.
5. Be Clear About Your Intentions with Your Beneficiaries to Avoid Later Disputes.
First, you as the insured should know that if a named beneficiary is contested, the insurance company can and will delay payment on claims as long as it needs to investigate and settle the matter. Again, there is no incentive for the insurance company to pay out quickly.
Second, to avoid disputes among your beneficiaries (or with people who think they are or should be your beneficiaries), it is important to be clear about who you intend to name. You can either have full and frank discussions with your beneficiaries, or, you can reiterate your intention in your will.
If you choose to discuss the matter with your beneficiaries, be sure to let them know that if their claims are denied for any of the above reasons, there is still a chance they could get paid, and they should not accept no for an answer. Your beneficiaries should contact an experienced life insurance attorney to help them fight for their rights under the policy.