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5 Reasons Why Your Life Insurance Claim Might be Denied
When a person dies with life insurance, the family expects that the policy will pay them a death benefit. However, it is possible to receive a denial for the life insurance claim for various reasons, often as a result of poor communication of key information. Here are some of the most common reasons to receive a denied life insurance claim and why it may happen to you or your family.
Deny Life Insurance Claim for Inaccurate Information
The most common reason for a refused life insurance claim is because of the information provided to the life insurance company. For example, if you claim to be healthy at the time that you purchase the life insurance policy, then you die of a condition you were diagnosed with prior to obtaining the life insurance, you can have your claim denied. That is important to know because it is critical to provide your life insurance company with only very accurate information about your health and your current risks. If you mislead any information to the agency, they can deny life insurance claims without any benefit to you.
It is key to provide all the information you have to your agent at the time of obtaining the policy. Even things like writing the wrong driver’s license number can lead to costly mistakes.
Life Insurance Suicidal Thoughts – Will It Cover Your Death?
Will life insurance cover suicide? This is one of the biggest concerns for many people. This depends on the details within the life insurance policy. In nearly all situations, it becomes important for you to provide a clear understanding of the causes of death. For example, some policies will exclude suicide if the death occurs during the contestability period, but they may cover it at other times, such as five years after getting the coverage. Also, keep in mind that there are other types of deaths that may not be covered by your policy. For example, dying during a war as a result of that war can be a key factor in a denial of life insurance coverage. Also, if you die as a result of engaging in dangerous hobbies, that may cause the denial. That may include things like skydiving.
Denied Life Insurance Due to Nonpayment of Premiums
Perhaps one of the easiest ways to avoid a denial of coverage is by keeping up on the payments for it. Nonpayment of premiums for life insurance will cause the life insurance company to deny your claim. If you miss even one premium payment, this can lead to a cancellation of the policy, leaving you unable to maintain the policy long term. If the company does cancel the policy due to nonpayment, you may also have to apply again for a new policy and that could mean higher costs as well.
Life Insurance Claim Denied Due to Contestability Period
Most life insurance policies include a contestability period. This can range from a few weeks up but it generally is for two years from the date of purchase. During this time, you may not have full protection in place. If you die during this period, the life insurance company can investigate the death and your application to ensure that every bit of information on your application was accurate and that there were no warning signs that you would die so early.
The key here is that the life insurance company does not have this ability to inspect the death as closely after this period ends. For example, a minor omission of key information during this period may not be overlooked, the claim may be denied, and the policy may never pay out. That same bit of information a few years later, would not have allowed the company to discredit or deny the claim.
Declined Life Insurance for Illegal Activity
It is also important for you to ensure that life insurance is always managed properly. For this, it becomes necessary for you to not engage in any illegal activity during the time that you have coverage. Keep in mind that life insurance denials may be overturned, in some cases, by a court of law, depending on the circumstances.
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