Will Insurers Typically Pay a Life Insurance Claim?
If a loved one passes away and you are the beneficiary of the life insurance policy, what can you do if your claim is denied? How can you know if the denial of your claim is valid – or if the life insurer is operating in bad faith? A California insurance claims attorney such as McKennon Law Group PC may be able to help.
You expect a life insurance company to pay the agreed-upon benefit after the premiums have been paid diligently every month for years or even decades. And if the decedent was your family’s provider, there may be a risk of financial hardship if your claim is denied.
Obviously, life insurance companies prefer to pay as little as possible when a claim is filed, but if your claim is rejected, the help you may need is only a phone call away.
Some insurance companies simply will not pay the death benefit if they think they can get away without paying it. If your claim is denied, you will have a better chance of resolving the matter successfully if you are advised and represented by a California life insurance lawyer such as McKennon Law Group PC.
If you keep reading, you will learn when a life insurance company may validly reject a claim, and you will learn how insurance companies sometimes act in bad faith to deny claims illegitimately. You will also learn what the right lawyer will do on your behalf if your claim is wrongly denied.
What Basics Should You Know About Life Insurance?
A life insurance policy is a life insurance contract between a policyholder and an insurance company. You or the insured pay regular premiums, and the insurer pays a death benefit to your beneficiaries at the time of your death. Life insurance coverage provides an important financial safety net for your loved ones.
“Term life” and “whole life” are the two basic types of life insurance. Term life insurance pays if the policyholder dies during the policy’s term, which is usually from one to thirty years. Whole life insurance pays a death benefit whenever the policyholder dies but there is also a cash value component to the policy that will typically increase over time, like a savings account.
You pay more for less coverage with whole life insurance, but whole life insurance can give you lifelong coverage and provide extra support during retirement.
What Types of Exclusions are Contained in Life Insurance Policies?
Typically, if someone dies due to natural causes, an illness, or an accident, the beneficiaries will receive the life insurance payout, but beneficiaries may be unable to collect that payout if the policyholder dies pursuing a risky hobby or working in a risky occupation.
Risky hobbies are pursuits with a heightened risk of injury or death, such as hang gliding, sky diving, motorcycle racing, auto racing, mountain and rock climbing, scuba diving, and comparable recreational activities. Risky occupations include logging, mining, and working offshore on an oil rig or as a fisherman. Policies often have exclusions for these types of work or risky hobbies.
For obvious reasons, Suicide and drug overdose exclusions are also common in life insurance policies.
Insurance companies can and often act in bad faith in applying their exclusions so you will want to consult an attorney if your claim is denied because of the asserted application of a policy exclusion.
Are Life Insurance Claims Denied for Other Reasons?
Risky activities, suicides and drug overdoses are not the only reasons why life insurance claims may be denied. If a life insurance beneficiary murders an insured (or is linked by the police to your murder), that person will not receive a death benefit.
Additionally, most life insurance policies have a contestability period for the policy’s first two years, so most policies will not cover a death if there was a material misrepresentation in the life insurance application. If the policy is contestable, then insurers will actively look for any misrepresentations in the application to try to rescind the policy so they can deny a life insurance claim. For example, if you represented on the application that you do not smoke, but you in fact have smoked in the relevant time-period, or if you represented that you did not have certain medical conditions but in fact you were diagnosed with those conditions in the relevant time- period, the death benefit will almost certainly be denied.
Insurance companies can and often act in bad faith when they attempt to rescind a life insurance policy so you will want to consult an attorney if your claim is denied because of the asserted rescission of a policy.
Finally, death benefits may be denied to your beneficiaries if you or the insured failed to make premium payments and the policy was lapsed prior to the insured’s death.
Insurance companies can and often act in bad faith when lapsing policies so you will want to consult an attorney if your claim is denied because of the asserted lapse of a policy.
There are also many issues that arise in connection with beneficiary designations (or lack thereof). In this regard, you must name primary and secondary beneficiaries for the death benefit payout, or it may not go to the person or persons who you wanted to receive it.
What Else Should You Know About Life Insurance Policies?
Beneficiaries should understand that insurance companies may withhold benefits legitimately in certain situations. Be sure to read the policy’s fine print to understand what is covered and what is not. If necessary, you may want to ask the insurance agent to spell it out for you.
If you are still uncertain or confused about what types of death are covered by a life insurance policy, a California insurance claims attorney such as McKennon Law Group PC can review the policy on your behalf and explain any language in the policy that may be unclear or ambiguous.
No matter what reason a life insurance company gives for the denial of a claim, beneficiaries should know that the insurance company does not have the final say about your claim. The final say belongs to the courts.
How Should You Respond If a Life Insurance Claim Is Denied?
If your life insurance claim is denied or unreasonably delayed, you have recourse, and you have the right to fight back – without regard to the insurance company’s size or your own financial situation.
If you are the beneficiary, and if the life insurance company denies your claim, you may receive a denial letter that provides vague reasons – or no reasons – for the denial. Contact the company and demand the specific reasons for the denial. Have them put it in writing. This is required by California law and required in most states.
Your next step is contacting an insurance claims attorney who will discuss your rights, review the policy and your claim, and develop a strategy for challenging the denial of your claim.
How Will a Life Insurance Attorney Help You?
A well-qualified life insurance attorney will review the policy and the purported reasons for the claim’s rejection. If your claim was illegally or wrongly denied, your lawyer may be able to negotiate an agreement with the insurance company, but if negotiation is futile, your attorney can take the case to court.
However, many of these disputes can be settled quickly with a letter from your attorney that includes the right records and cites to the correct and relevant laws and authority. When the insurance company receives that letter and sees that you are serious about pursuing your claim because you have hired an experienced life insurance attorney, it may settle with you immediately.
It may be better if a dispute over your claim can be settled without going to court, but the right lawyer will take whatever legal steps are required on your behalf. If you are a beneficiary and your life insurance claim is denied, call McKennon Law Group PC. Payment of your claim may come down to whether you have chosen the right life insurance attorney to pursue your life insurance claim.