Insurers rarely deny life insurance claims, but this can happen. Here's why some claims are denied and how to appeal the decision. Amanda Shih is a licensed life, disability and health insurance expert and a former editor at Policygenius, where she covered life insurance and disability insurance. Here are four things that can lead to a denial of a life insurance claim.
Life insurance companies use a process called underwriting to determine premiums and general eligibility. Best practices for preventing a denied claim focus on the policyholder's approach to applying for insurance. If you earn a living through one of these hazardous occupations, life insurance is often available to members of an industry association in your profession. Your broker can then work with you to develop strategies for what to do next and how to get approval from another insurer.
In cases involving employer group life insurance and other similar policies, there is only 60 days to appeal the denial. While you still have life insurance options, the available policies may not meet all your coverage needs or may be very expensive. Accredited insurance companies won't do everything they can to avoid paying a valid claim, but they make it clear from the start what could cause them not to pay a death claim. If your request was denied due to smoking-related complications, for example, you may have to wait six months or more and show your lifestyle changes to the insurance company.
A challenge period involves the first two or three years after the effective date of a policy, in which insurers reject claims under certain circumstances. And even if an insurer disqualifies an appeal, potential beneficiaries who disagree with the decision act with foresight and seek counsel. For example, if you lied about a medical condition, but died in a car accident that wasn't related to that condition, your insurance company could still deny you the death benefit. Whether it's a heart murmur, a history of smoking, or information about weight, false statements in an insurance application jeopardize the entire policy.
Insurers carefully review the terms of policies before paying claims to ensure that policyholders have met their obligations, says Amy Bach, executive director of the consumer group United Policyholders in San Francisco. Older adults will have a harder time finding the life insurance products they want with affordable premiums. If your life insurance application is denied, your life insurance agent or broker will contact you and explain why. If you die within the challenge period, which usually lasts two years from the date you purchased your policy, your insurer can investigate whether you wrote the correct information in your life insurance application.
