Dealing with the death of a loved one is never easy, but it’s especially hard when you learn that an insurer has denied your life insurance claim. While many companies pay on their policies in good faith, hundreds of millions of dollars are withheld from policyholders each year.
When people pay faithfully on a life insurance policy, they assume the payout will take place without question. Unfortunately, this is rarely the case. Insurance companies deny claims for many reasons, and it’s important for policyholders to understand the strategies used for these denials.
Why Companies Deny Your Life Insurance Policy
For most life insurance companies, making money is their primary goal. Basically, they want to pay out as little money as possible. To do this, they use a variety of different strategies, including:
#1: Unclear Policy Language
Many people never read their insurance policies, and even if they do, the language used in them is often vague and ambiguous. Because insurers know it’s difficult for policyholders to understand the content, they use this to their advantage. Insurers may use words or phrases in the policy that can be open to interpretation, and then later clarify that language in a way that allows them to deny the claim. They may distort the language and interpret exclusionary terminology for their benefit.
It’s important to know that most states have laws that outline an ambiguity principle. This rule ensures that any insurance policy with a vague or unclear meaning that could be construed in favor of the agency will go in favor of the policyholder.
#2: The Policyholder Died During the Contestability Period
After a person purchases a life insurance policy, he enters into a contestability period. This is a time period that allows an insurer to investigate an insurance claim. Usually, this period is two years; however, in some states, the period is one year.
If the policyholder dies within the contestability period, the insurers will investigate the claim to see if that person gave inaccurate information on his application—often referred to as material misrepresentation. This could include a misstatement or omission about the policyholder’s medical condition.
#3: The Policy Wasn’t Valid at the Time of Death
Typically, this is the most common denial given by a life insurance company. If the policyholder ever missed a payment, the insurer can say that his policy wasn’t valid or active at the time of death. And while it’s important that the policyholder makes consistent premium payments, the insurer must send a notice of cancellation and provide a grace period before it cancels a policy. Additionally, many companies are required to offer a policy renewal option before canceling.
Contact Marcus Vaden Law
If you’ve been waiting for a life insurance payout, only to find that your claim has been denied, it’s important that you hire an experienced life insurance claims attorney. Legal representation is critical if an insurance company has denied your claim, and our attorney will work with you to give you the best chance for an approval. Call Marcus Vaden Law today for a free consultation.