Everyone is encouraged to have life insurance because it is, in some cases, the last and best chance for your survivors to get some amount of money upon your death. Many employers include life insurance as a perk, and in some cases, certain individuals are required to buy it, depending upon their importance to the financial future of a business.
Like all insurance, however, the final determination of whether or not the policy is actually paid out lies solely with the insurance company. And, the insurance company has some fairly strict rules regarding whether or not they pay out on life insurance policies.
There are several scenarios in which the insurance company can legally refuse to pay. The key is to remember that life insurance policies are contracts between the insurance company and the insured. If the insured fails to keep their end of the bargain in just about any way, the insurance company can legitimately refuse to honor the contract. Here are some scenarios in which this might happen:
1) Beware the contestability period. The beginning of a new relationship is always a time for discovery, and when it comes to starting a new life insurance policy, this is also the case. It is important to know that the repercussions of being less than truthful in that first application for benefits can be truly harsh. That’s because all life insurance policies have a clause that allows the company to continue to confirm the information that you provided over the course of your lifetime, and then use that as a basis to deny the claim if you are untruthful. When it comes life insurance policies, honesty really is the best policy. Literally.
2) Tell the whole truth, period. Just as misstating information on a life insurance policy application will doom you, so too will an incomplete application. Lying by omission, that is, not disclosing something on your appication, can lead to the insurance company denying your family’s claim.
3) Exclusions apply. As with any insurance policy, there is fine print as to what is and is not covered. In life insurance policies, this is particularly difficult since it can mean the difference between a policy being paid and not being paid. One of the most common exclusions is if the insured dies by suicide, especially if it happens within two years of taking out the policy.
4) Pay your premiums. One of the most obvious areas in which insurers can get out of paying a claim is where the insured fails to pay the required premiums. Remember, life insurance is a contract and the failure to pay on that contract is considered a breach, for which the insurance company can get out of their obligation to pay when the insured dies.
If you find yourself being denied life insurance benefits after the death of a loved one, you have rights and you have options. It is imperative to contact an attorney as soon as possible to determine what you can do, especially since ERISA (Employee Retirement Income Security Act of 1974) which governs most insurance policies, gives only 60 days from the receipt of the notification of denial to appeal. We are ready to help you understand your options at this difficult time and are ready to help as soon as you need. Call us at (305) 431-5678.