What to Do if Your Life Insurance Claim Is Denied
Quick Facts
Claims are denied at least 1% of the time and only in certain circumstances like fraud, misrepresentation, or non-payment of premiums
You should appeal the decision if you think the denial is incorrect or unfair
Gather all supporting documentation to back up your claim
What if you’ve invested your efforts and hard-earned money into obtaining a life insurance policy, making timely payments, and filing a death benefit claim only to be told that your life insurance company has rejected your claim? It might be an unwelcome surprise since life insurers deny a policy claim 1% of the time.
That being said, certain conditions can lead to rejection. For example, if the policyholder fails to make their policy payments or supply adequate medical information before the application process.
If your claim is denied, you can expect the life insurer to refund any life insurance premiums made and cancel your policy. You may also decide to appeal the decision by reaching out directly to the insurer. Still, this will only alter something if there is an oversight or miscommunication in processing your application.
In this article, we dig deeper into such scenarios and guide you through understanding valid reasons for life insurance claim denial and the forms of recourse available.
Why do life insurance claims get denied?
When you buy life insurance, there’s an underlying assumption that the policy will provide a financial safety net in the event of your death. That’s why it can be so disheartening to hear that a claim has been denied. After all, life insurance aims to give you and your family some peace of mind.
Here are a few reasons why life insurance won’t pay out.
Suicide Exclusion
Most life insurance policies come with a suicide exclusion. A suicide exclusion means that in the first two years of coverage, insurers will not pay out for suicide deaths. This clause protects the insurer from fraudulent claims or individuals who buy life insurance right before they take their own lives.
Exclusions in Policies
Another reason life insurance companies may deny claims is if the policyholder died while committing a crime or any other action excluded explicitly in their policy.
For example, the benefit may be reduced or refused entirely if the policyholder engaged in extreme sports activities when they died.
Misrepresentation on Application
Submitting false information on your application may lead to a complete denial or reduction of any associated benefits. Therefore, it’s essential to be honest when filling out your life insurance application so that your benefits are not nullified due to incorrect information provided. Find out what happens if you lie on your life insurance application.
Nonpayment of Premiums
Any unpaid premiums can also lead to claim denial. Life insurance policies require policyholders to make timely payments throughout the contestability period (usually the first two years of coverage). Failing to do so may result in a loss of coverage and a denial of the claim. Learn more about what happens if you don’t pay your life insurance premium.
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What to Do if Your Life Insurance Claim Is Denied
There are two things you can do if your claim is denied:
Contact the insurer
Appeal the rejection
Let’s look at each of these options in more detail.
Contact the Insurer
The first step in appealing a denied claim is to understand the denial. Carefully read over the insurer’s initial denial letter and determine if the reasons are clear or if they have provided sufficient evidence.
Subsequently, contact the insurance provider and request additional information concerning why they refused payment of the death benefit. Necessary documentation could include medical records, autopsy reports, or proof of premium payments, all evidence validating your claim.
Keeping track of the timeline is vital when appealing a claim from an employer’s group life insurance policy. These policies typically have limited appeal periods, usually no longer than 60 days.
Appeal the Rejection
If the claim is still denied after examining the paperwork, then you may need to file an appeal. You can do this by filing a formal appeal letter with the insurance company, which should outline your argument and any evidence you wish to present.
Your state insurance department can help guide you through the process and provide other forms of assistance.
Get an Attorney
No one wants to hire a lawyer, but it may be the best option for denied life insurance claims. After all your attempts with the insurer have been unsuccessful and you feel like you’ve reached a dead end, turn to an experienced attorney.
An attorney can give you professional guidance on if there is a realistic chance of success if you opt for legal action. They can also assess other details like how complex the case might be or what kind of fees and costs you should expect.
How to Prevent Having a Claim Denied
As we’ve discussed earlier, there are various reasons why life insurance companies deny claims. The good news is that you can take steps to ensure that your life insurance claim is approved.
Application Responses
One of the essential parts of the life insurance application process is providing detailed answers about health and health-related activities such as smoking, prescription or other medications, and dangerous hobbies.
You must also provide accurate and up-to-date information to reduce the likelihood of a claim denial due to misrepresentation on your application.
Understanding Terms & Conditions
Read and understand the terms and conditions of your life insurance policy. That will help ensure that you meet all of the requirements for filing a claim and avoid unnecessary delays.
Application Review
Before submitting your application, read through everything carefully to ensure it is accurate and complete. If you are applying for employer-provided life insurance coverage, ask your benefits administrator or HR representative to review your application.
How to Protect Your Beneficiaries From a Claim Denial
Life insurance provides financial support to your family after you pass away. However, if your beneficiaries cannot file a successful claim, they may not receive the money they need. If you want to ensure your loved ones aren’t denied a claim, here are the best steps.
Be truthful in your application. Don’t try to hide any health issues or other pertinent information because that could increase the likelihood of claim denial once the policy is in force.
Pay your bills automatically. Set up automatic payments for your life insurance premiums so you don’t have to worry about missing any payments or losing coverage.
Update your beneficiaries. Make sure to update your policy’s beneficiary information regularly so that your designated recipients will receive the proceeds in the event of a claim. Learn how to choose a life insurance beneficiary.
Share your plans with beneficiaries. Tell your beneficiaries about your life insurance plan and how they can file a life insurance claim if necessary.
You can contact your insurance company for assistance if you need clarification on any of the above steps. They should be able to provide guidance and help you ensure that your beneficiaries won’t be denied a claim.
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What to Do if Your Life Insurance Claim Is Denied: The Bottom Line
No one expects to have their life insurance claim denied, but unfortunately, it does happen. Therefore, always be honest and straightforward when applying, as that tactic has a notably higher success rate than attempting to skirt around the application process.
If your claim is denied, don’t give up. You may still be able to successfully appeal your denied life insurance claim with the help of an experienced attorney.
And remember to take preventative measures, such as providing accurate responses on your application or updating beneficiary information regularly.
Frequently Asked Questions
Can you fight a life insurance denial?
If you’ve been denied life insurance and believe it’s due to incorrect or insufficient medical information, there are still ways to fight back. You can appeal the decision with your life insurance provider. A great place to start is by asking your doctor to send updated medical files to the life insurance company to prove your eligibility. However, such action is time-consuming and requires extra paperwork and advanced communication with multiple parties.
Why would a life insurance company deny a claim?
Life insurance claim denials are generally due to misrepresentation of facts or non-disclosures on the policyholder’s part. These can include misstating or omitting facts on the application, a lapse in payment of premiums, or death due to an excluded cause.
How often does life insurance deny claims?
Only about 1% of claimants in the United States experience a life insurance claim denial. In most cases, this is due to an issue with the policy itself or a misrepresentation of facts by the policyholder or beneficiary. But if you’ve paid your premiums on time and been truthful when filling out your policy application, the odds of receiving reimbursement are excellent.
What is contestability period in life insurance?
It’s essentially a clause in your agreement with your provider that states that if the policyholder passes on within two years of purchase, the insurance company can, within limits, examine the circumstances and question any claims made by beneficiaries.
What happens if an insured dies during the contestability period?
Dying within the contestability period of a life insurance policy can be a worrying time, as there are usually clauses in the contract that could invalidate the policy.
Fortunately, life insurance companies must still honor these contracts. They will review the claim to ensure everything is correct and in order — this is to ensure that the life insurance underwriting decision was based on valid facts.
What happens after the contestability period?
At the end of the contestability period, any insurance policy is held firm. This means that once this time frame has passed, the recipient no longer has to worry about their insurer objecting to their claims. They will be legally entitled to receive benefits according to the contract’s parameters. In short, if you pass this period unscathed, you can rest assured that your insurer can no longer deny your claims.
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Rachael Brennan has been working in the insurance industry since 2006 when she began working as a licensed insurance representative for 21st Century Insurance, during which time she earned her Property and Casualty license in all 50 states.
After several years she expanded her insurance expertise, earning her license in Health and AD&D insurance as well. She has worked for small health in…
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Written by
Rachael Brennan
Licensed Insurance Agent
Benjamin Carr worked as a licensed insurance agent at State Farm and Tennant Special Risk. He sold various lines of coverage and informed his clients about their life, health, property/casualty insurance needs.
Assessing risks and helping people find the best coverage to suit their needs is a passion of his. He appreciates that insurance was designed to protect people, particularly during times…
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Reviewed by
Benjamin Carr
Former State Farm Insurance Agent
