On What Basis are Life Insurance Claims Typically Denied?
When a life insurance claim is denied, delayed, or otherwise handled in a way that prevents the rightful beneficiaries from securing the benefits to which they’re legally entitled, it can leave the beneficiaries in a highly vulnerable position. Not only must a beneficiary shoulder the emotional burden of grieving (and readjusting to a life without their loved one), but if their legitimate life insurance claim is denied, the beneficiary must also come face-to-face with serious financial ramifications — this is especially true in situations where the deceased person provided financial support during their lifetime.
Common Reasons for Life Insurance Claim Denial
Insurers can and will deny a life insurance for any number of reasons, but there are certain common justifications used as a basis for denial. By understanding these reasons and the insurer’s strategy, you can more effectively challenge the denial of your claim.
Consider the following:
Misrepresentations and Failure to Disclose Information
In the event that the life insurance policyholder dies during the relevant contestability period, the insurer may investigate the policy and determine whether the information on the application is correct, or whether it constitutes a material misrepresentation. If there has been a material misrepresentation, then the insurer may cancel the policy and deny the payout of benefits, even if you (the beneficiary) qualify for such benefits under the terms of the life insurance policy. Material misrepresentations need not involve proactive disclosures — in some cases, a failure to disclose information can qualify as a material misrepresentation.
It’s also worth noting that any misrepresentation (or failure to disclose) must be material to the policy in order to justify cancellation of the policy, and subsequent denial of a claim. In other words, if a misrepresentation involves irrelevant matters, then the insurer cannot deny the claim on that basis. For example, suppose that the deceased policyholder wrote the wrong address on their application. An insurer cannot deny benefits on that basis, as the address of the policyholder is not material to the payout of benefits.
Coverage Exclusions Apply
Life insurance often differ in terms of their exclusions. Whereas one life insurance policy may exclude deaths that occur due to voluntary participation in highly-risky recreational activities (such as bungee jumping), another life insurance policy may have no such limitation. Exclusionary clauses form the core of the value proposition for many life insurance policies — the stricter the exclusions in the policy, the lower the premiums tend to be.
Oftentimes, life insurance exclusions are ambiguously worded. It’s important to note that ambiguity will generally be interpreted in favor of the policyholder (and their beneficiaries), so with the aid of a skilled attorney, you can — hopefully — interpret the exclusionary clauses at-issue in a way that allows you to secure benefits.
Policy Lapsed Due to Missed Payments
As a beneficiary, it can be difficult to determine — prior to the death of the life insurance policyholder — whether the insurance policy lapsed and is therefore no longer active. If the policyholder failed to pay their premiums, even for a short period of time, then the insurer may have cancelled the policy, and will use that as justification to deny claims made by the beneficiaries.
Though a policy lapse may seem impossible to overcome, there are certain circumstances under which a beneficiary may still recover benefits. For example, if the insurer did not send notices to the policyholder (or otherwise warn the policyholder about the prospect of their policy lapsing due to nonpayment), then the beneficiary may invalidate the cancellation and recover benefits.
Designated Beneficiary Issues
Sometimes, the policyholder may not name a beneficiary, or may name a non-specific beneficiary (e.g. their children, their relatives, or their friends) which can lead to an insurer denying benefits to a beneficiary. The insurer might deny benefits on the basis that the policyholder did not intend to name you as the beneficiary. For example, if the policyholder named “their relatives” as the beneficiaries, the insurer may argue that certain beneficiaries — say, a niece or nephew of the deceased — are not entitled to recover damages. In some cases, ambiguity in the designated beneficiary context will default to Illinois state law on intestate succession and inheritance.
Relevant Documentation is Missing
Oftentimes, an insurer may simply deny your life insurance benefits claim due to a lack of documentation. If you submitted your claim without adequate documentation, the insurer may deny the claim, even if your claim is arguably legitimate and supported by the evidence. You may not have to sue the insurer to recover benefits under such circumstances — with the aid of an attorney, you can gather the necessary and relevant documentation, and resubmit or appeal the denial.
Work With an Experienced Chicago Life Insurance Denial Attorney
If you have had your life insurance claim wrongfully denied by your insurer, you may be able to appeal the denial or — depending on the circumstances — bring a lawsuit against the insurer and recover damages.
Here at Bryant Legal Group, P.C., our attorneys have spent decades advocating on behalf of life insurance beneficiaries who have had their claims wrongfully denied. We believe in personalized representation, and to that end, we maintain an open and transparent relationship with our clients, keeping them apprised of new developments in their case, and working closely with them to ensure that their needs are being met.
Call (312) 561-3010 today to schedule a consultation with an experienced Chicago life insurance denial attorney here at Bryant Legal Group, P.C.