Life Insurance Claim Denied? You May Still Have Options
Receiving a life insurance denial after the loss of a loved one can be devastating. Families often depend on life insurance proceeds to pay mortgages, household expenses, funeral costs, and other financial obligations. Unfortunately, many beneficiaries simply accept the insurance company’s decision and walk away.
In many cases, that is a mistake.
Insurance companies sometimes deny valid life insurance claims based on alleged misrepresentations, exclusions, policy lapses, contestability investigations, or disputes over the cause of death. A denial letter does not necessarily mean the insurer’s decision is correct or final.
Common Reasons Life Insurance Claims Are Denied
1. Alleged Misrepresentation on the Application
The insurer may claim that the deceased failed to disclose a medical condition, smoking history, medication use, or other information when applying for coverage. However, not every omission justifies denying a claim.
2. Policy Lapse for Non-Payment
An insurer may argue that premiums were not paid and that coverage lapsed before death. In some situations, there may be disputes regarding notice requirements, grace periods, automatic payments, employer-sponsored coverage, or administrative errors.
3. Contestability Period Investigations
Many life insurance policies contain a two-year contestability period. If the insured dies within the first two years after the policy is issued, the insurance company will often conduct a detailed investigation before deciding whether to pay the claim. During this investigation, the insurer may obtain medical records, pharmacy records, physician notes, hospital records, prior insurance applications, and other documents to determine whether the insured accurately answered the questions on the application. Insurers frequently scrutinize issues such as pre-existing medical conditions, smoking history, alcohol or drug use, medications, mental health treatment, and other health-related information.
It is important to understand that the existence of a contestability period does not automatically give the insurer the right to deny a claim. The insurer must still establish that there was a material misrepresentation or omission that would have affected its decision to issue the policy or the premium charged.
One area that frequently arises during contestability investigations is suicide. Most life insurance policies contain a suicide exclusion that applies during the first two years of the policy. If the insured dies by suicide during that exclusion period, the insurer may deny the claim in accordance with the policy terms. However, once the exclusion period has expired, many life insurance policies continue to provide coverage even if the death is the result of suicide.
Many people also believe that once the two-year contestability period expires, the insurer can never challenge a claim. While it generally becomes much more difficult for an insurer to deny coverage after the contestability period has ended, insurers may still attempt to do so in cases involving alleged fraud or intentional misrepresentation.
A denial issued during or after the contestability period does not necessarily mean the insurer’s decision is correct. Beneficiaries should seek legal advice before accepting the insurer’s position and walking away from a potentially substantial claim.
4. Exclusions in the Policy
Certain policies contain exclusions relating to specific activities, medical conditions, or circumstances of death. The wording of exclusions is often highly technical and must be interpreted carefully.
5. Beneficiary Disputes
Sometimes the insurer does not deny coverage but refuses payment because there is a dispute over who is entitled to receive the proceeds.
Can a Life Insurance Denial Be Appealed?
Yes. A life insurance denial is not necessarily the final word. Depending on the circumstances, beneficiaries may be able to challenge the factual basis for the denial, obtain additional evidence, negotiate a resolution, or commence legal proceedings.
Frequently Asked Questions About Life Insurance Denials
How long do I have to challenge a life insurance denial? Limitation periods may apply and legal advice should be obtained promptly.
Should I accept the insurance company’s explanation? Not necessarily. The insurer’s interpretation is not always correct.
Can a claim be denied because the deceased forgot to mention a medical issue? Not automatically.
Can a life insurance company deny a claim after premiums have been paid for years? Sometimes, but each case depends on the facts and policy wording.
Is it worth hiring a lawyer after a denial? In many cases, yes.
Contact Landy Marr Kats LLP
If your life insurance claim has been denied, do not assume that the insurance company’s decision is final. Many beneficiaries are surprised to learn that denials can often be challenged successfully, particularly where the insurer has relied upon alleged misrepresentations, policy exclusions, contestability period investigations, or disputed interpretations of the policy wording.
At our firm, we understand the financial and emotional stress that can result from a denied life insurance claim. Our lawyers can review the denial letter, policy documents, application materials, and supporting evidence to determine whether the insurer’s decision can be challenged.
Importantly, in many life insurance denial cases, we are prepared to act on a contingency fee basis. This means that you do not pay legal fees unless we successfully recover compensation for you. A contingency fee arrangement allows many individuals and families to pursue valid claims without having to incur significant upfront legal costs.
If your life insurance claim has been denied, or if you have questions about a claim that is currently under investigation, contact us at lawyers@lmklawyers.com or at 416-221-9343 ext. 228 for a consultation. The sooner you obtain legal advice, the sooner you can understand your rights and options.