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Reasons for life insurance claim denials

On Behalf of | Nov 10, 2022 | Long-Term Care

Many New Jersey residents worry about their spouses, children, and other relatives’ well-being. They may take out life insurance policies to help the beneficiaries if a tragic event occurs. However, some issues may lead to denied claims.

Why insurers may deny claims

The insurance policy may have exclusions, meaning certain deaths are not covered. Often, dangerous activities, such as mountain climbing or deep water scuba diving, are among these exclusions. The person purchasing the policy may benefit from reviewing the language to determine what activities are not covered.

Errors and omissions could invalidate a life insurance policy. When filling out a life insurance policy, it is necessary to provide complete and accurate information. The policy application might ask the applicant to list all previous medical conditions or treatments, but the person forgets something. The insurance company may deny a claim, depending on the specific rules of the contestability period.

The contestability period refers to the timeframe the insurance company may examine a policy for misrepresentation. Typically, the duration is two years. State law establishes the length. The beneficiary may challenge a claim denied due to a minor omission.

Not paying the premiums could lead to the cancellation of a policy. Beneficiaries might not know whether the policyholder missed payments, which may lead to an unfortunate surprise when the policy claim receives a denial. Policyholders could take various steps, including paying one or two months in advance or signing up for automatic payments. Such actions may prevent cancellations.

Taking legal action against an insurance company

The possibility exists that a company may wrongfully deny life insurance claims. For example, the company might state that the cause of death was excluded when no such language exists in the policy. A lawsuit might result in a judgment that forces the company to pay.

Other issues, such as violating the contestability period, may lead to litigation. Bad faith lawsuits may result when the insurer had no intention of honoring its contract.