Life insurance can help your loved ones deal with the financial impact of your death. Sadly, some life insurance claims are denied by insurance companies, leaving the grieving loved ones in a difficult position of having to battle the insurance company for the payout. In this article, our lawyers discuss the most common reasons for life insurance denials and how to avoid them.
What is Life Insurance?
The main reason people take out life insurance is to provide a financial benefit to dependants upon premature death of an insured person. The death benefit paid from a life insurance policy is a tax-free, lump-sum amount that can be used to replace your income so your family can maintain their standard of living and/or provide for your children or dependents. Sadly, some life insurance claims are denied by insurance companies, leaving the grieving loved ones in a difficult position of having to battle the insurance company for the payout. In this article, our lawyers discuss the most common reasons for life insurance denials and how to avoid them.
1. Misrepresentation in the Application
As part of an application for life insurance, the insurance company will ask you to fill out a few lengthy forms. These forms will contain questions regarding your medical health, risk factors such as smoking, alcohol use, and dangerous hobbies like heli-skiing or scuba diving.
These factors help the insurance company determine the applicant’s risk of death. Based on the assessment of your individual risk factors, the insurer will decide on whether to insure you, the benefit amount available to you and the monthly premium amount payable by you based on this information.
It is important to be truthful and thorough in your life insurance application. If you do not know an answer then do not guess – make sure you provide accurate information. If you do not understand the question then ask for clarification from the insurance sales person or bank representative. Confirm your understanding in writing so there is no confusion on anyone’s part. According to British Columbia legislation, you are required to provide full disclosure to the insurance company. If you misrepresent any of the required information, the insurance company may deny the life insurance benefit to your beneficiary after you die.
2. Missed Premium Payments
To maintain your life insurance coverage, you must pay the monthly premium every month. If you miss your payments, you might lose your coverage and the payments you made with it.
It is important to be aware of the different grace periods your policy may have. The grace periods vary depending on the insurance company, policy type, and the governing law in your jurisdiction. In British Columbia, the legislation allows for a 30-day “grace period” in which you can pay an overdue premium for life insurance.
Sometimes beneficiaries are unaware that their loved one stopped paying the premiums, so they file life insurance claims that eventually get denied. The insurance companies deny such claims because the policy would not have been active at the time of the policyholder’s death due to the non-payment of the premiums. Therefore, it is important that you stay on top of the regular premium payments to ensure active insurance coverage.
Have you been denied your life insurance claim? Contact one of our experienced insurance denial lawyers today. We work on a contingency fee arrangement so there is no up-front cost to you and you only pay a legal fee if the insurer pays you 604.581.7001
3. Expired Term Life Insurance
A term life insurance policy is a policy that terminates at a specific age (usually 65). If you pass away after the term has expired, no life insurance benefits are payable. Once the term expires, you may be able to apply for a policy renewal for another term for a higher premium or convert the policy to permanent coverage.
It is important to remember that your insurer could refuse to renew the coverage at the end of the policy term. If you are looking to renew or convert your term life insurance, make sure to familiarize yourself with the policy terms or talk to your insurance broker to ensure you know your policy’s deadlines.
Life insurance claims may be denied for many reasons, including misinformation on the application, missed premium payments and expired term life insurance. If you have been denied life insurance coverage, it is important to understand that you may have limited time to appeal the claim. Whatever the reasons, our team of experienced insurance denial lawyers will help you fight for your rights under the policy.