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Your loved one died during the life insurance contestability period – what now?

Life insurance contested? Call ME, Michael Eisner

The life insurance contestability period is generally two years.  This means if the insured person dies in the two-year window, payment is not automatic to the beneficiary.  When this happens, the insurance provider conducts a review to determine if they will pay the claim.  

What are the reasons for claim denial during the life insurance contestability period?

Life insurance companies start their investigation by examining the cause of death.  The policy has a suicide clause.  Therefore, if the insured commits suicide before the contestability period ends, life insurers do not pay the death benefit payment.  Instead, the insurer refunds premium payments to the beneficiary.  Unfortunately, family members lose the financial security their loved one intended to purchase.

If the cause of death is not suicide, the insurance firm looks for other reasons to deny the beneficiary’s claim.  They may only do this, however, if the life insurance policies are still in the two-year contestability period.  The life insurance company reviews the application form and policy application process.  The first thing is to look for inaccurate information.

The life insurance company has an underwriting process before a life insurance contract is issued.  Underwriting includes taking a medical history.  Many companies also require a medical exam.  Risky hobbies also must be disclosed.  This is relevant information the insurance company uses to set the premiums.  If wrong information is provided, then the company collects lower premiums.  Because of the lower rates, they argue the life insurance application would not have been approved, or the amount charged would have been higher.  This is the excuse they need to deny the claim.

Life insurance policy contested
Crop worker of agency holding paper document of life insurance policy in envelope

When does wrong information result in the loss of a death benefit claim?

Not all wrong information is the same.  Honest mistakes happen.   However, if the false information or failure to disclose vital information is a material misrepresentation, the new life insurance policy nullifies the policy.  If the incorrect information is not essential to any decision, then the claim should be allowed.

What can you expect if your claim is within the life insurance contestability period?

To the insurance company, it does not matter whether the insured person died from a car accident, medical malpractice, wrongful death, heart attack, or other natural cause.  If your loved one died during the period of contestability, expect delays in payment.  The insurer often uses a service provider to gather medical records from the insured.  They take their time to verify the authenticity of the information provided during the application process.  If there is a medical condition (such as a history of lung cancer) which is material to how the new policy was issued, the life insurance coverage is not honored.

Other than misrepresentations or fraud, why do insurance companies deny payment of death benefits?

Some policies are forced placed coverage. These are written without any underwriting as part of a larger group. You often see these advertised on TV. Because there is no underwriting, no death benefit is paid whenever the insured dies during the contestability period. Other times, the policy is not in full force at the time of death. If the policy lapsed, the is no longer an insurance contract. No matter why your claim is denied, consult with a life insurance lawyer and review your rights.

Do you have a life insurance beneficiary claim being contested or investigated?

If your claim is submitted and payment is not promptly made, it is a good idea to call life insurance attorneys.  Do you have a denied life insurance claim?  Call ME, Michael Eisner, your life insurance attorney, for your free consultation.

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