The death of a loved one is exceptionally hard, but finding out that a life insurance claim was denied can make matters worse. We can all agree that there is no amount of money that can ever replace the one you lost, it can certainly help to ease your worry – especially if you are financially dependent on him or her.
Applying for an insurance policy is not that hard, but getting rejected is something that no one takes into account. Imagine collecting all the paperwork and then finally submitting it to the insurance carrier, only to find out two weeks later that your application has been rejected.
While most people assume that life insurance is a guaranteed protection, claims can be denied.
Yes, this does happen! We all believe that it’s all about the premiums and as long as we pay them on time, we don’t have to worry about anything. However, this is the part of the process that comes afterward.
Let’s assume that you do have a life insurance policy. After you passed away in an accident, your family went to claim the insurance. However, for some reason, the insurance carrier refused to pay anything.
In an episode of “60 Minutes,” an American TV program that aired in 2016, it was exposed how insurance agencies commit fraud. The plain and simple truth was that insurance carriers fail to pay the majority of the beneficiaries when it comes to life policies. The policies are secured for around $10 million and the beneficiaries are paid less than $10,000.
So, what is the reason behind this?
Let’s have a look at some of the reasons why insurance claims are rejected:
Staking an Insurance Claim
As mentioned earlier, filing for a claim after the breadwinner of your family has passed away is easy. You need to submit the insurance claim form, death certificate, last rites documents, and legal papers that prove your claim is legit. The average insurance policy payout time, once the claim is made, is 60 days. However, insurance carriers find ways to deny claims as this is how they make their money.
1. The Absence of Will and Beneficiary
One of the most commons reasons why life insurance claims are rejected is based on so-called incomplete documents. The insurance carrier tries to confuse the policyholders saying that they don’t have all the documents required for the claim. If you failed to state the beneficiary’s name in the policy, then chances are that the carrier will not pay you the claim. They will ask for proof of identity and a notarized bequest that states you are allowed to make a claim.
2. Withholding Facts When Buying the Policy
While this is not a fraud that an insurance carrier does, they do take full advantage of it. Depending on the type of job you have, they might try to find out ways to not pay your family members stating that you lied on the policy form. If you have a risky job, make sure you don’t hold back any information. Don’t even think about fudging on the form just so you can buy the policy. This will backfire on your family once you have passed away.
If you didn’t lie on the form and still the carrier tries to disqualify your claim, then they are committing fraud. This usually happens when the policyholder dies under unsuitable circumstances.
3. Unpaid Premiums
If for some reason, the deceased wasn’t able to pay the last few premiums on time, the insurance carrier considers the life insurance policy abandoned. This might be a legit reason but there are still ways that the policy can be claimed. However, the insurance carrier bases the case entirely on this one factor and refuses to pay.
4. Smoking, or Another Health-Related Issue
If you smoke, and as a result have high-blood pressure and don’t communicate this to your insurance company during this one- to two-year period, it has the right to cancel your policy.
Asking if you smoke or if you have ever smoked is a pretty standard question on any life insurance application. Maybe you quit smoking a couple of years ago. The insurance company will still ask if you used to smoke and how long ago you quit. It matters, because the effects of smoking are long term. Some insurance companies might classify you as a non-smoker if you haven’t smoked for a couple of years. For others, it might take five or 10 years of not smoking before you’re considered a non-smoker.
Where something like high blood pressure is concerned, this is a perfect example of the importance of being completely honest when filling out a life insurance application. Let’s say you don’t mention that you have high blood pressure on your application, and then you die in a manner that seemingly has nothing to do with your high blood pressure — maybe in a car accident — within the period of contestability. The insurance company could assert that you did have high blood pressure and that it could have been the cause of your death. See how that works?
5. Death by Accident
Another common reason why insurance claims are rejected is when the carrier is deceptive with the policyholder with policy clauses. This is why it is important to read the fine print before signing any document. The types of accidents are clearly defined in the policy. For example: the insurance carrier will pay out the money if you die in a car accident, not if you die on your property from a fire in the kitchen.
Sometimes, they even try to find their way around the clause. For example: if the policyholder died in the accident, the carrier will pay the money. However, the carrier may refuse to pay if the policyholder’s car registration documents were not up to date.
6. Insufficient Coverage Terms
Let’s talk about the different policy terms. For example: you bought an insurance policy that comes to fruition once you reach a certain age. However, you don’t claim the insurance and die in an accident. Now because you didn’t claim the policy while you were alive, your family won’t be able to lay claim to it.
There are different scenarios when it comes to insufficient coverage terms such as the insurance policy can be claimed only after the policy holder’s death. Now the cause of death also matters — was the death by natural causes or due to some unforeseen accident?
In the former case, the insurance carrier confuses the deceased’s family members with directions that they need to file documents in order to claim lost money on behalf of the deceased.
Are you exposing yourself to self-harm? What exactly defines self-harm? If you enjoy having a glass of wine every night, then are you abusing alcohol? If you die while you were under the influence, does this make the insurance claim made by your family null? The insurance carrier can mold any situation into a scenario where the deceased comes out as the responsible party, stating that suicide was committed.
Get Insured With Confidence
Please note that this is not a full comprehensive list of reasons life insurance won’t pay. These are, however, some of the more common instances.
The ultimate rule of thumb here is, be completely honest, and don’t ignore the fine print on your life insurance policy. You don’t want to be responsible for losing the benefits on that policy because you “did not know” or because you thought you could get away with something by not being 100% truthful.
The best advice is to be sure to read your entire insurance contract — including and especially the fine print — before you sign it.
If you’re unsure of anything, just ask. That’s what the licensed, professional Pawson Insurance agents are here for, to guide and direct you to the insurance policy that’s best for you. They will read the fine print with you and help you understand what it all means, especially as it pertains to your particular situation.
Digital Marketing Director
Pawson Insurance | Legal Disclaimer |
Informational statements regarding insurance coverage are for general description purposes only. These statements do not amend, modify or supplement any insurance policy. Consult the actual policy or your agent for details regarding terms, conditions, coverage, exclusions, products, services and programs which may be available to you. Your eligibility for particular products and services is subject to the final determination of underwriting qualifications and acceptance by the insurance underwriting company providing such products or services. Statements on this website as to policies and coverages provide general information only. This information is not an offer to sell insurance.