Why Your Life Insurance Claim Can Be Denied
Life insurance is a plan put into place to ensure that your loved ones are taken care of when you are gone. It allows them financial stability to continue living as they were. The worst thing that can happen is that they are left with nothing. Here are a few reasons why your life insurance claim can be denied.
Death During Contestability Period
Life insurance policies have a period of about two years which is considered the contestability period. If the insured were to pass away during this time, the insurance companies would investigate whether they lied on the application. If it is discovered that there was some form of deception, they could deny the claim.
Insurers are very strict when it comes to upholding the terms of a policy. Allowing a policy to lapse is one of the easiest ways for you to lose your life insurance claim. Most policies allow a grace period of 30 days after payment is due. So, if you miss a payment, it’s not the end of the world. Just make sure you get it in before your grace period ends. If you have a hard time keeping up with all your payments, scheduling them out would be a sure way to never miss one.
Failure to Disclose Relevant Information
One of the most common reasons for denying a life insurance claim is the failure to disclose relevant personal information. The insurance provider can argue that they were not given all the necessary information to decide whether they wanted to risk the payout. If it was just an incorrect address or phone number, there is no need to worry. Those would be considered errors and not harm your policy. More serious things, such as getting a doctor to lie on your medical exam, are grounds for denial.
Type of Death Not Covered
Another reason your life insurance claim might be denied is that the type of death is not covered. The most common is suicide within the first few years of the policy. If the insured were to take their own life during that time, the claim can be rejected. However, after two years that exclusion is usually dropped. Some policies do not cover deaths that occur during high-risk activities, such as sky diving, scuba diving, or even some jobs. Make sure you speak to your insurance agent if any of those apply to you.
How To Avoid Being Denied
Here are some steps you can take to help yourself avoid being denied a life insurance claim.
Honesty on the Application
Being honest on your application is a very easy way to keep yourself out of any trouble with the insurance providers. Take your time and review your answers. Any accidental omission can be used as an excuse to avoid a payout.
Read Insurance Policy Clearly
With any important paperwork, the best thing you can do is make sure you read through it carefully. This is especially true with a life insurance policy. There will be plenty of terms and concepts that may seem foreign to you. Do not hesitate to reach out to your insurance agent and gain clarity on your policy. Make sure you know what is covered and what is not.
Make Your Premium Payments
An insurance provider can cancel your policy if you miss just one payment. Ensure that you are always on time with paying the premium. Setting up automatic payments is something that can be done to avoid mistakenly missing a payment.
Life Insurance Questions?
We hope this information on why your life insurance claim can be denied is helpful.
If you’d like to learn how we can help you plan your retirement, call Empower Brokerage to speak to one of our Life and Annuity experts (888) 539-1633
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