Most of us will deposit thousands or even tens of thousands into life insurance. All of the money spent is accompanied by the implicit confidence that our spouse or other dependents will receive a payout after death for all the years in which we have loyally paid premiums.
Unfortunately, that does not always happen. Life insurance companies are notoriously combative and often maliciously caught both against policyholders and their beneficiaries. Here are five common reasons why life insurers decline claims, and some tips on how to avoid those issues and what a beneficiary should do if his claim is denied.
. 1 Overseas Travel and "Dangerous" Hobbies
Many seniors use their retirement assets and time to travel the world and pursue their favorite pastimes. If you are one of these, note that in your life insurance claim questionnaire, you may have been asked to disclose travel plans and indicate whether you are participating in activities that insurers classify as "high risk", such as diving or hang-gliding.
Life insurers use this questionnaire to assess how high your risk is. The higher the risk, the higher the monthly premium you pay. If you have not stated that you want to travel or take part in a high-risk activity and then conclude a policy and something terrible happens, you have just given your insurer a reason not to pay your beneficiary the life insurance benefit.
If the claim is rejected on this basis, the beneficiary must hire an insurance lawyer to combat it. Even if the rejection is reversed, a misrepresentation on the original questionnaire will result in the premium being changed retrospectively and the difference between what you paid in premiums and what you should have paid from the payment of your premium Beneficiaries will be deducted.
Conclusion: All reveal.
. 2 Suicide
If a policyholder commits suicide within two years of taking out a life insurance policy, a claim as a fraud is completely rejected. The only option for a beneficiary to take out a life insurance policy in this case is to successfully argue that the death was accidental and not suicidal.
Accidents similar to suicide happen even though the victim did not intend to injure themselves ̵
After two years, most guidelines treat suicide like any other cause of death.
. 3 Lost and Forgotten Life Insurance Policies
In terms of life insurance, knowledge is really power. If you want to make sure your loved ones receive their insurance benefits, you'll equip them with the tools they need to make a claim long before you expect them to claim it.
Let them know first and foremost that you have a life insurance and that they are beneficiaries! Make sure they know where they can find the insurance numbers and explain the need to provide a death certificate. Granted, it's not easy to talk much less about your own death, but if you had the strength to take out a life insurance policy, and you also have the power to talk with your loved ones about it.
If your beneficiaries do not know you are insured, they do not know they have to apply. Insurance companies are not trustees. You are not required to act in the interest of your beneficiaries. Equip your loved ones with the knowledge and documentation to make their claims when the time comes.
. 4 Problems with the contestability period
Insurers have the right to investigate claims made within the first two years of a policy. This "contestability period" combats potential fraud, which in turn keeps insurance costs low.
During the period of countervailability, insurance companies may use any misrepresentation in a life insurance claim to refuse a claim, even if you have only made a genuine mistake and that mistake has not changed your risk. Are you 5ft 8in tall, but the application says 5ft 9in? Born on December 27, but the application is December 24? Claim rejected.
As long as the mistake or omission is not fraudulent, your beneficiary may have your claim reversed with the help of an insurance agent. Even if the mistake, if it were not made, would have increased your premium due to increased risk, your claim should not be immediately rejected. Instead, your lawyer negotiates with the insurer about what premium payments you should have made during your lifetime. The insurer then deducts from the death grant the difference between what you paid and what you should have paid and your beneficiaries get the remainder.
Do you know that fraud can invalidate a policy at any time . Do not do anything that could be considered fraudulent (such as hiding an incurable disease) when you apply for life insurance. Your spouse or children will not receive anything, even if you have already exceeded the contestability period.
. 5 Expired Policy / Failed Premiums
Insurance companies increasingly use a single missed monthly payment as a reason not to settle insurance claims. So, what happens if you are unable to work and do not receive your bills before being handed over to a hospital?
If you pass after a missed payment within one month, your beneficiaries should have no problem with their claim. Life insurance policies have a grace period of usually 30 days, but sometimes longer, from the time a payment is missed until the end of the coverage period.
There are two ways to successfully settle a claim after expiration of a policy and after expiration of the period of grace:
First, insurance lawyers have successfully voiced de facto exemption from hardship if a longtime customer dies Could not pay due to hospitalization or loss of faculties. In this case, the beneficiaries receive the full value of the policy.
Second, insurance lawyers have also successfully argued that the missed premiums should be deducted from the final benefit that the beneficiaries receive. Many directives contain such a provision, and even if they do not, an insurance company will invariably be motivated to coordinate with their beneficiaries instead of bringing an action.
Being forewarned means being prepared. Use these tips to make sure that your loved ones receive what you intended to do.
Veronica Baxter is a legal advisor based in Philadelphia, Pennsylvania. She works for Chad G. Boonswang, Esq.
Photo by Josh Wilburne on Unsplash