There are several reasons why life insurance claims can be denied. Knowing those reasons and how to appeal or challenge a denial of benefits can be critical for families in their time of need. The following information from Life Insurance Claims Specialist and may be helpful to you or a family member. Mark’s Number One Rule: Do Not Try to Handle the Denial of Benefits on Your Own! (See the last section of this article for important information.) For a free consultation please email your life insurance benefit questions to Mark Wolfe at mark@bfw-lawyers.com. Please put Life Insurance Question in the subject line. Or call him at 251 410-7761.

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I have been helping families and clients for many years with legal issues related to life insurance benefits. Most specifically with contesting or challenging the denial of life insurance benefits. Some times a lawsuit is required to secure benefits and some times the benefits can be recovered through a pre-litigation request for reconsideration. If you’ve been the victim of denied life insurance benefits, I think the most important thing is for you to fully understand why the benefits were denied and how you may contest or challenge the denial of benefits. What follows are the most common reasons life insurance benefits are denied with some general legal information about the basis for the denial.

1. DEATH OCCURS DURING THE CONTESTABILITY PERIOD.

Most life insurance policies have a contestability period. This is a period of time, usually two years, after the policy has been issued where the insurance company can take a look back at the application and conduct an investigation to make sure all “relevant and material information” was disclosed on the application. This is sometimes called “retroactive underwriting” and is most likely to apply to policies with no formal medical examination before the policy is issued.  An example of this type of denial would be if the applicant says his or her weight is 300 lbs but then the insurance company finds medical records right before the application was submitted showing the applicant’s weight to have been 325 lbs. If this weight is higher than the underwriting guidelines for the policy, then the company may deny the claim and refund the premiums claiming had they known of the higher weight, they would not have issued the policy. Even a minor undisclosed medical condition on the application such as high blood pressure can be deemed a material misrepresentation and be grounds for denial. In general, the undisclosed information does not have to be a contributing factor to the death to support a denial of benefits and it does not have to have been an intentional misrepresentation. Simply forgetting to disclose material information or even an inadvertent mistake can be enough to support the denial of benefits.

IMPORTANT INFORMATION: Insurance rules and regulations vary greatly from State to State and some life insurance policies are even governed or controlled by Federal law. The legal definition as to what is or is not “relevant and material information” on an application can be different from State to State. Before accepting the denial of benefits and cashing the premium refund check, consider consulting with a Life Insurance Claims Specialist or an experienced Attorney to have the denial of benefits reviewed. Also, even if you have cashed he premium refund check, some State laws will still allow you to contest the denial of benefits.

2. DECEIT OR FRAUD.

This covers a number of different situations and may extend past the contestability period. This basis for denial covers more than an inadvertent mistake on the application such as mistakenly putting the wrong weight. It would apply to situations were the intent of the applicant was intentionally misleading or deceitful. For example a person is diagnosed with terminal cancer and then buys a life insurance policy and intentionally and knowingly does not disclose the cancer diagnosis.  Even if the death occurs outside the contestability period, the insurance company may deny the benefits claiming the policy was secured by the fraudulent suppression of material information. This can also apply to beneficiaries if they secure a policy for a loved one under fraudulent or unscrupulous circumstances.

3. THE CAUSE OF DEATH IS EXCLUDED OR
NOT COVERED UNDER THE POLICY.

Most life insurance policies exclude coverage for suicide. However, some policies only exclude suicide during the contestability period. Some life insurance policies exclude benefits if the death occurs “related to or while engaged in a dangerous activity” such as scuba diving or sky diving. Accidental Death (AD) benefit policies often exclude coverage if the accidental death is contributed to by any number of conditions or even pre-existing conditions.  A very common exclusion under AD policies or clauses is if the decedent was intoxicated at the time of death.

IMPORTANT INFORMATION: Exclusion clauses in life insurance policies can be legally and/or medically difficult for the insurance company to prove; however, they will often send the beneficiaries a denial of benefit letter referencing complex medical and/or legal terminology. Even if you think the exclusion sounds legitimate, you should have the denial of benefits reviewed by a Life Insurance Claims Specialist or an experienced Attorney.

4. PREMIUM PAYMENTS WERE NOT MADE.

When premium payments are not made in accordance with the terms of the policy the policy lapses and no benefits are owed. Some policies have a short grace period for late payments. Some policies have reinstatement provisions that allow for past due premiums to be paid and the policy to be “reinstated;” however, the reinstatement provisions often require a new reinstatement application and establish a new contestability period. Some times the “reinstated” policy is basically a new policy with new exclusions and conditions. One of the most common causes for non-payment of premiums is when an automatic payment withdraw is not increased periodically as premiums increase. For example, person takes out a Universal or Whole Life policy that builds cash value over time. The policy has a 10 year level premium and for the first 10 years the premium is paid timely via an automatic withdraw from a bank account. After 10 years the premium for the policy increases but the automatic payment remains the same. The accumulated cash value is then used to make up the premium difference until it is used up. Once the cash value is depleted the policy will lapse for non-payment of premiums.  Unfortunately, many Universal and Whole Life Insurance policies were sold with the representation that the cash value would accumulate at such a high rate that the premiums would always be covered or even diminish or go way at some point in the future. This has led many people, especially elderly people, to inadvertently disregard notices and information from the insurance company about premium increases and/or premium payments made via the accumulated cash value of their policy.

IMPORTANT INFORMATION: There have been several class action lawsuits against insurance companies for misrepresenting or misleading consumers about the viability and achievability of “diminishing premiums” or “vanishing premiums.” You can Google those terms and the Company to see if you may be a class member or have any rights under a related class action settlement.

5. DISPUTE AS TO BENEFICIARIES.

While not necessarily a denial of benefits, a life insurance company may delay the payment of benefits if there is a dispute as to the beneficiaries under a life insurance policy. In some cases, the life insurance company may require a legal determination as to who is entitled to the benefits. As a simple rule of thumb, life insurance benefits are paid to the named beneficiary of record. This could be the person or persons identified on the application or someone identified on a legitimate change of beneficiary form on record with the company. However, issues can arise if a former beneficiary challenges the legitimacy of a change of beneficiary form. Also, if there are no contingent beneficiaries listed and the primary beneficiary is deceased, then legal action may be required to determine who is entitled to the life insurance benefits. Finally, some States have provisions that automatically remove a named spouse as beneficiary upon divorce.

DO NOT TRY TO HANDLE THE DENIAL OF BENEFITS ON YOUR OWN! 

Life insurance policies are complex legal documents that contain lots of defined terms and conditions. How those terms and conditions stand up against the laws and regulations of your State requires knowledge and expertise. Many policies have guidelines and rules for how to appeal the denial of benefits but those may or may not be binding or required. However, some life insurance policies are subject to Federal laws and regulations which require strict adherence to procedures for how appeals must be presented. In those situations, failure to properly file the appeal can prevent any further legal action to obtain benefits. Some times the denial of benefits is blatantly wrong and may entitle the victim to additional compensation over and above the policy benefit amount. If you are the victim of denied life insurance benefits, in the very least you should consult with a Life Insurance Claims Specialist or an experienced Attorney as soon as you are notified that the benefits are denied and before responding or appealing the denial of benefits. He or she should be able to give you an overview of your rights and explain the legal issues you are facing and provide you with a strategy to try and recover the benefits.

About the author: is a licensed and practicing attorney in the State of Alabama. Through his law firm he has handled denied life insurance cases in Alabama and Mississippi. He has also been a consultant on life insurance claims and cases in other States where he works with local attorneys to help secure life insurance benefits for clients and customers. He has helped families recover over one million dollars in denied life insurance benefits with the average policy value being $50,000.00. Mark provides free consultations for people who have questions about life insurance policies or benefits. Please email your life insurance benefit questions to Mark Wolfe at mark@bfw-lawyers.com for a free consultation. Please put Life Insurance Question in the subject line. Or call him at 251 410-7761.

REQUIRED DISCLAIMERS: Alabama Rule of Professional Conduct 7.2: No representation is made that the quality of legal service to be performed is greater than the services provided by other lawyers. The Mississippi Supreme Court advises that a decision on legal services is important and should not be based solely on advertisements. Free background information is available upon request to a Mississippi attorney. The listing of any area of practice by a Mississippi attorney does not indicate any certification of expertise therein. See Mississippi Rules of Professional Conduct Rule 7.2(d), Rule 7.4(a), Rule 7.6(a) (1997). General Disclaimer: This information is posted for general information purposes to help those interested parties or persons with potential civil claims better understand their rights and potential causes of action. If readers are currently represented by an attorney on the subject matter of this post then they are encouraged to continue with said representation. No attorney-client relationship is established by this post.