Life insurance not paying out? Here are the three most common reasons and what to do when your life insurance claim is denied.
The Insured Committed Suicide
If there is any evidence to suggest the insured committed suicide, the life insurance company will deny your claim for death benefits.
When an insured commits suicide during the first two years of the policy, called the “contestability period,” that is grounds for claim denial even if the policy does not expressly exclude death by suicide from coverage. There is a public policy reason for this – to discourage those intending to commit suicide from taking out a life insurance policy to provide a windfall for their loved ones.
The death certificate may or may not list suicide as the cause of death. Even if it does, there are many causes of death that look like suicide but are not, such as autoerotic asphyxiation or accidental discharge of a firearm. In these cases, an experienced life insurance beneficiary attorney can help you fight the denial of your claim.
The Insured Had Drugs in Their System
Death due to drug or alcohol overdose is commonly excluded from life insurance coverage. If an insured had drugs or alcohol in their system at the time of death, the life insurance company will likely deny a claim for death benefits even if the cause of death had nothing to do with drugs or alcohol.
Why? Because life insurance companies only make money for their shareholders when they don’t pay claims. This inherent conflict of interest means that many legitimate life insurance claims are unfairly denied. Be sure to consult with an experienced life insurance attorney if your claim was denied for this reason.
The Insured Died but the Policy Lapsed
Life insurance coverage lapses and terminates if the insured fails to pay premiums. If the policy lapsed and the insured dies, the life insurance company will deny a claim for death benefits.
However, there are many instances when policy lapse is not the fault of the insured and a claim denial can be overturned, such as:
- The insured was hospitalized or institutionalized and never received the notices of lapse mandated by law;
- The insured was entitled to waiver of premiums due to disability;
- The insured was not given the opportunity to convert an employer’s group life insurance coverage to individual coverage;
- There was an administrative error on the part of the insured’s employer or the life insurance company.
Never take no for an answer. If your life insurance claim was denied for one of these reasons or any other reason, be sure to consult with a life insurance attorney to determine whether you have grounds to fight the claim denial.