Why Life Insurance Claims Are Denied—and What You Can Do About It

Life insurance exists to provide financial protection and peace of mind to beneficiaries after the loss of a loved one. Yet for many grieving families, that promise is shattered when the insurer denies the claim. While insurers often pay out valid claims, denials still occur with alarming frequency—often for reasons that beneficiaries do not expect and sometimes do not understand. At McKennon Law, we specialize in challenging wrongfully denied life insurance claims and holding insurers accountable. In this article, we break down the most common reasons life insurance claims are denied and what you can do if you are facing a denial.

Misrepresentation or False Information on the Application

One of the most common reasons insurers deny life insurance claims is misrepresentation on the original life insurance application. This means the policyholder provided inaccurate or incomplete information that was requested on the policy application.

Common misrepresentations include failing to disclose a pre-existing medical condition, underreporting smoking or alcohol use, omitting details about dangerous hobbies, or not reporting other life insurance policies. Insurers use the application to assess risk. If the applicant did not disclose some significant medical information that was requested on the application and later dies from a related (or even unrelated) cause, the insurer may refuse to pay out the claim. If the misrepresentation is deemed “material,” the insurer may void the policy, even after years of premium payments. However, the law requires that these misstatements must have actually affected the insurer’s decision to issue the policy, and courts closely scrutinize such denials—particularly if the policy has been in force for more than two years.  

Most life insurance policies have a contestability provision that limits the insurer’s ability to “contest” a policy more than two years after the policy is issued.  During this time, the insurer can investigate the accuracy of the application if the policyholder dies. The claim could be denied if the insurer finds that the policyholder misrepresented material information, even unintentionally.

Lapse in Premium Payments

Life insurance is a contract. You pay premiums, and the insurer agrees to pay a benefit when the time comes. But if those premiums stop, so does the coverage. However, California law (and many others) provides strong protections for policyholders, including mandatory grace periods and advance notice requirements before a policy can be terminated.  In California, life insurance policies must follow specific rules that protect policyholders from losing coverage due to missed payments. Under California Insurance Code §10113.71, life insurance companies must provide a 60-day grace period after a missed premium before a policy can lapse and send a written notice at least 30 days before terminating the policy for nonpayment.

Lapses can be largely avoided by setting up automatic payments. If you are struggling financially, contact your insurer immediately to explore options. Some may offer reduced coverage or temporary relief to help keep the policy active.

At McKennon Law, we frequently litigate claims where insurers failed to comply with these statutes. If an insurer did not provide timely and proper notice, the policy may still be in force—despite a missed payment.

Cause of Death Is Excluded

Not all causes of death are covered under every life insurance policy. Some policies specifically exclude specific causes of death. Common exclusions include suicide within the first two years of the policy, death during the commission of a crime, war or terrorism-related deaths, or death from drug or alcohol overdose.  These exclusions must be clearly stated in the policy and interpreted narrowly under the law.  In many cases, McKennon Law has  successfully argued that an exclusion does not apply, or that the insurer misinterpreted the facts surrounding the insured’s death.

Beneficiary Issues or Disputes

One of the most common reasons we see life insurers not pay claims is that there is a dispute about who is the rightful beneficiary of the death insurance proceeds.  A claim may be denied not because of the policy terms but because of problems with the beneficiary designation  or fights about undue influence upon the insured who named a beneficiary.  Some disputes might include no named beneficiary, a deceased beneficiary, a divorce situation, or when legal restrictions apply, such as minor children without a legal guardian. In some cases, community property laws or ERISA law may affect who is entitled to the death benefit. These disputes are legally complex, and McKennon Law  routinely assists clients in resolving them, whether through negotiation or litigation.

Fraud or Suspicious Circumstances

A less common reason for denial exists if the insurer suspects fraud in some manner not including misrepresentations in the application.  Insurers may launch an investigation and put the claim on hold or deny it entirely. Fraud might involve falsified documents, staged deaths, or suspicious beneficiary behavior. Insurance fraud is taken seriously, and even if the claim turns out to be valid, a lengthy investigation can delay the payout.

The Policy Was Never Activated Because There Was No Evidence of Insurability Provided

Another troubling basis for denial of life insurance claims under employer-sponsored ERISA plans arises when the insurer or employer failed to obtain required Evidence of Insurability (EOI)—even though the insured was told they had coverage. At McKennon Law, we have handled numerous disputes involving life insurers and an ERISA plan participant not qualifying for a policy because they are deemed ineligible for coverage because no EOI was provided. In many cases, employees elect supplemental life insurance during open enrollment and begin paying premiums, only for their beneficiaries to learn after the insured’s death that the insurer never received or approved the necessary EOI forms. Despite confirming enrollment, deducting premiums, and even issuing benefit confirmations, insurers may later claim the coverage was never actually effective. This post-claim underwriting like this is unjust and deeply unfair to employees who reasonably believed they were insured.

Courts have increasingly scrutinized this tactic. Under ERISA, when an employer or plan administrator fails to follow proper procedures or misleads the employee into believing coverage is in place, courts may find that coverage is valid under principles of equity or breach of fiduciary duty.  We have successfully litigated numerous cases where insurers attempted to deny claims on the basis of missing EOI—despite years of premium payments and confirmation of coverage. If you are facing a denial on these grounds, it is critical to have experienced ERISA counsel review whether the insurer or employer mishandled the enrollment process.  We can usually get the life insurer and/or the plan participant’s employer to pay all of most of the death benefit and our attorneys’ fees and costs too.

What You Can Do If a Claim Is Denied

If your life insurance claim has been denied, the first and most important step is not to panic—and not to accept the denial at face value. Insurance companies often deny claims for reasons that do not hold up under legal scrutiny, including alleged misrepresentations, lapses in coverage, lack of EOI, or improperly applied exclusions. Make sure to request a written explanation of the denial that explains the full basis for the denial, along with the claim file and the policy documents. Carefully review the reasons given and the timeline of events surrounding the denial. You have the right to fight the denial decision, and doing so promptly is essential.

Next, consult with an experienced life insurance attorney. Life insurance policies—especially those governed by ERISA—are complex and involve strict legal standards and deadlines. At McKennon Law, we have successfully handled many denied life insurance claims, holding both insurers and employers accountable for wrongful denials. Whether the insurer is claiming a lapse for non-payment, a failure to submit Evidence of Insurability, or asserting a policy exclusion, we know how to navigate these disputes. Often, a denial can be reversed through a strong appeal or litigation if necessary.

Finally, be sure to act quickly, as deadlines for contesting a denial can be short, particularly under ERISA plans. The earlier you engage counsel, the better your chances of preserving evidence, building your case, and recovering the benefits you are owed. At McKennon Law, we offer personalized, aggressive representation aimed at achieving full recovery for our clients. If your life insurance claim has been denied, contact us today for a consultation to evaluate your rights and next steps.