How to Avoid Having Your Life Insurance Claim Denied

If you have just received your new life insurance policy, you have anxiety wondering if anything can go wrong that would cause the policy to be canceled. Once the insurance company has offered a policy and the customer has accepted it, the company is committed to the terms specified in the policy, however there is an exception provided by a clause in the life insurance policy called the contestable clause. You need to read your contestable clause so you know how long your contestability period lasts and what can result in your life insurance being canceled.

TIP: If you have any trouble understanding your contestable clause or insurance contract, don’t hesitate to ask an insurance agent for help.

Life Insurance Contestability Period

During the life insurance contestability period the company can cancel the coverage and return the premium if it discovers that the information given by the policyholder to qualify for the insurance contains major misstatements during the application process. Usually this period of time is in the first one to two years. The life insurance contestability clause provides the company a reasonable opportunity during this period to protect itself against people getting insurance that would not have qualified for it if they gave truthful information on their application. It also provides the vast majority of honest policyholders the assurance that their policies will be honored.

TIP: You should also find the policy’s incontestability clause in which the company gives up its right to challenge the life insurance contract after the specified period and agrees that it will not deny claims even if serious misstatements were made in obtaining the insurance.

Material Misstatements and Your Life Insurance Contract

Your life insurance policy will detail what type of misstatements can result in your policy being voided or a claim being denied. A material misstatement is one on the application that affected the underwriting and clearly changed the situation by either avoiding refusal by the insurer to issue the policy, or by getting better coverage or premium payments than the applicant should have. If you make an important omission by neglecting to tell the company about a major health problem which could have led the company to deny you insurance, this would be a material misstatement or omission. The insurance company would have to discover the mistake during the contestable period specified in the policy, and if they fail to do so, you can assume your policy will be honored.

If the life insurance contestability period has passed and an error that would not have led to denial of coverage is discovered then the company would normally adjust the amount of coverage to coincide with the correct age or sex.

TIP: Even an honest mistake or a change of circumstances that was unforeseen can result in a life insurance claim denial if you die during the contestable period. For example, most life insurance application ask if you plan to travel outside of the United State in the next 12 months. If you honestly answered this question no, but then, due to an unexpected change, traveled or moved to a place outside of the U.S. and die during the life insurance contestability period, then the claim on your policy would be denied.

Avoiding Contested Life Insurance

The best way to avoid any life insurance death benefit from being contested is to be truthful from the start on your life insurance application, and advise them of any changes in your life. You might pay a little more in your premium rate, but you will rest easier knowing that your life insurance will be paid to your beneficiary upon your death. If your policy has been voided, or the beneficiary is filing a claim during the contestability period that is being denied, then you should contact an experienced attorney immediately. The life insurance company may be rejecting your benefits in bad faith and an attorney can determine if you have a legitimate case and work to get you the money you deserve. Click here to find an experienced attorney that can help you today. Attorneys offer free consultations, and work on a contingency fee, so you have nothing to lose by seeking legal help.

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Case Studies: Life Insurance Claim Denials

Case Study 1: Misstatements During Application Process

In this case study, John Smith’s life insurance claim was denied after his sudden demise. The insurance company discovered major misstatements in John’s application during the contestable period, which invalidated his coverage. Despite being an honest mistake, the misstatements led to the cancellation of the policy and denial of the claim.

Case Study 2: Material Misstatement and Omission

Sarah Johnson purchased a life insurance policy but failed to disclose her pre-existing health condition, a major omission during the application process. Unfortunately, Sarah passed away within the contestability period, and the insurance company denied the claim due to the material misstatement. The contestable clause allowed the insurer to cancel the policy and refuse the death benefit.

Case Study 3: Change of Circumstances

In this case, Michael Brown answered truthfully on his life insurance application regarding his travel plans outside the United States. However, due to unforeseen circumstances, Michael had to travel abroad and tragically died during the contestability period. As a result, his beneficiary’s claim was denied since the policy did not cover deaths occurring outside the U.S. during that period.