Important Facts

3 Reasons Why Your Life Insurance Claim Could Be Denied

There can be many factors that go into whether or not your life insurance claim is accepted, but here are 3 common reasons why your claim may have been denied.

Life Insurance Claim Denied?

Life insurance companies pay out billions in life insurance claims every year in fact, 64 billion in death benefits was paid out in the year 2013 alone, according to the American Council for Life Insurers.1 But claims do occasionally get denied, usually for one of the three reasons listed below.

A lapsed policy

If for some reason you have neglected to pay your premiums regularly and your grace period for making a payment has expired, your policy could lapse and your claim may be denied. A policy that has lapsed and ultimately cancelled for nonpayment means that if you were to die, your beneficiary will not receive a death benefit payout.

In order for a life insurance claim to be paid, it must be an active, in-force policy. If you're having trouble making your life insurance premiums, be proactive and contact your agent or company representative right away to discuss your options. He or she may be able to help you get back on track before a cancellation for nonpayment occurs.

Material misstatements

“Material misstatements” is a term that means to misrepresent yourself on your life insurance application. For example, you don't want to be untruthful about your age or important medical information such as a chronic ailment or a history of smoking. Usually, after you sign your life insurance policy, there is a “contestability period” during which your insurance provider can investigate whether the information you provided on your application is accurate. If you should die during this contestability period and the insurance provider determines that your application included material misstatements, a life insurance claim could be denied.

Honesty is always the best policy. If you're unsure as how to answer any questions on your life insurance application, let your agent or company representative know. Don't guess!

The policyholder's type of death is excluded from coverage

Some policies have exclusions for deaths that occur while partaking in risky activities such as piloting a plane or scuba diving. Suicides are also typically excluded from coverage for a period of time after your policies inception date, but that exclusion is usually dropped after two years.

Every life insurance policy has exclusions, and they can differ greatly between carriers. For this reason, it's always important to know the specifics of your life insurance policy, particularly if you encounter a high level of personal risk in your line of work or if you regularly engage in hazardous hobbies/sports.

What you can do

There are a few simple precautions you can take now in an effort to avoid having your life insurance claim denied in the future. First and foremost: make your premium payments regularly, and make them on time. Of course, you may not be able to make your payments in the event that you become incapacitated, which is why it's important that you discuss the specifics of your life insurance policy with everyone who stands to benefit from it, and also the person you've appointed as your Durable Power of Attorney.

Be sure to let your loved ones know the name of your insurance provider, how much your beneficiaries should stand to gain (if you choose to disclose that information), whether you make your payments monthly or quarterly, and where all necessary paperwork for your policy is located. Keep your policy safe in a special folder, file, or deposit box, but don't keep its location secret. Your beneficiaries should also know that if a life insurance claim from a loved one is ever denied, they generally have a limited amount of time to take action once they've been informed of the claim's denial.

For more information on finding a life insurance policy or appointing someone as your Durable Power of Attorney, visit the Protective Learning Center.

1. https://www.acli.com/Tools/Industry%20Facts/Benefits%20Paid/Pages/Default.aspx

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All Learning Center articles are general summaries that can be used when considering your financial future at various life stages. The information presented is for educational purposes and is meant to supplement other information specific to your situation. It is not intended as investment advice and does not necessarily represent the opinion of Protective Life or its subsidiaries.

Learning Center articles may describe services and financial products not offered by Protective Life or its subsidiaries. Descriptions of financial products contained in Learning Center articles are not intended to represent those offered by Protective Life or its subsidiaries.

Neither Protective Life nor its representatives offer legal or tax advice. We encourage you to consult with your financial adviser and legal or tax adviser regarding your individual situations before making investment, social security, retirement planning, and tax‐related decisions. For information about Protective Life and its products and services, visit www.protective.com.

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Life Insurance Claims And Why They May Be Denied

When a life insurance claim is paid, the people you love will be financially protected by way of your policy's death benefit. And it's because of them, that you need to understand how to safeguard their future by ensuring that a life insurance claim isn't denied.

A policy that cancels for nonpayment, a misstatement on an application, or a policy exclusion that you weren't aware may result in the denial of a life insurance claim. This article looks at three reasons why a life insurance claim could be denied so that you can have an understanding on how to better prevent it from happening. For more information, visit the Protective Life Learning Center.

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