Life insurance policies allow those with dependents, such as children and spouses, to provide some financial stability to the people who depend on them if they die unexpectedly or at least offset the costs of a funeral and end-of-life medical care. Many married couples invest in life insurance policies for both spouses, and it is also common for parents to purchase policies that will protect their children.
Unfortunately, at the moment when someone needs that coverage the most, the company involved could try to avoid their obligations. If the policyholder paid their premium and maintain coverage, their dependents have every reasonable right to expect a timely payout on the policy when they die.
However, insurance companies can take steps to avoid paying out on legitimate claims. This kind of behavior, known as bad faith insurance denials, can leave customers vulnerable despite the best intentions of their loved ones. Thankfully, the beneficiaries of a life insurance policy with a claim denied in bad faith can likely take legal action against the company.
Determine the grounds for the attempted denial
The first and most important step toward pushing back against a bad faith insurance denial involves obtaining a statement from the insurance company, preferably in writing, explaining why they will not fulfill their obligations.
They might claim that the investigation into the cause of death is still underway, or they might point to some clause that they claim the policyholder or the beneficiaries violated. Once you know the reason for the denial, you can begin to gather evidence to support your claim.
Insurance providers have an obligation to the people who pay for their policies
Insurance companies make the most money from people who carry coverage that they never need. These often for-profit businesses will take a financial loss when they approve a substantial claim. Clearly, the business makes more money when it denies more claims.
However, to prevent companies from rejecting valid claims, there are many laws and rules in place protecting those who carry various forms of insurance. A company may take steps to mitigate its liability by limiting coverage in certain situations, but they may not deny valid claims in bad faith or make their contracts so complex that most legitimate claims would wind up denied.
If you can show either that the alleged reason for the denial is inaccurate or that the terms of the policy would effectively preclude most people from bringing a claim, you may have a good case for a bad faith action against the insurance company. You could seek the full benefit, as well as damages in certain cases.
It’s important to remember that the insurance company has to answer to state and federal regulators, as well as to people who carry their coverage. Taking action after an unfair denial of a life insurance claim can protect your family during a vulnerable time and other people who have similar coverage.