Discovering that your life insurance claim was denied can be overwhelming. After all, life insurance is meant to provide financial support during a challenging time, and denial can add further stress. However, understanding why the claim was denied and knowing the steps to take can significantly affect how you navigate the situation.
Life insurance claims may be denied for various reasons, some of which may seem confusing or unfair. However, insurance companies are bound by specific terms and conditions that policyholders agree to when they sign the contract. Denial is often the result when a claim doesn’t meet these terms. Fortunately, a denied claim doesn't have to be the end of the road. There are actions you can take to potentially reverse the decision.
Common Reasons for Life Insurance Claim Denial
When they deny life insurance claims, insurers base their decisions on the policy's terms and any discrepancies or omissions in the application or claims process.
Some common reasons for life insurance claim denial include:
- Non-Disclosure or Misrepresentation: Failing to disclose relevant health conditions, lifestyle habits, or other important information on the insurance application.
- Lapsed Policy: The policyholder may have missed premium payments, resulting in the policy lapsing and being no longer active.
- Contestability Period Issues: If the policyholder dies within the contestability period (usually the first two years of the policy), the insurance company may scrutinize the claim closely and deny it if any discrepancies are found.
- Cause of Death Exclusions: Certain causes of death, such as suicide within a specific period after the policy starts, may not be covered.
- Policy Exclusions: The policy may exclude specific circumstances or conditions, such as death resulting from illegal activities or extreme sports.
- Incorrect Beneficiary Information: Errors in listing the beneficiary or disputes among beneficiaries can lead to claim denial.
Understanding the reason behind the denial is the first step in addressing the issue. Each reason may require a different approach to resolve, but an experienced attorney can provide the legal services you need to fight for a better outcome.
Was Your Claim Denied in Bad Faith?
A claim denial in bad faith occurs when a life insurance company unjustly refuses to pay out a claim without a legitimate reason or fails to properly investigate the claim.
Insurance companies are legally obligated to act in good faith, meaning they must honor their contractual commitments and handle claims fairly and honestly. When a company denies a claim without reasonable grounds, deliberately misinterprets the policy terms, or unnecessarily delays payment, it may act in bad faith.
Victims of bad faith denials may have legal recourse and potentially sue the insurance company for damages, including the original claim amount, legal fees, and even punitive damages intended to penalize the insurer for its wrongful conduct.
Carefully Review the Denial Letter
Once you receive the denial letter, take time to read it thoroughly. The letter will outline the specific reasons for the denial, referencing the policy terms that were not met. This information is crucial in determining how to proceed.
If any part of the letter is unclear, consider reaching out to the insurance company for further clarification. Understanding the exact reason for the denial helps you decide whether you can rectify the issue or need to escalate the matter.
Gather All Relevant Documentation
Before taking any further action, gather all the necessary documents related to the policy and the claim. This includes the original policy documents, any correspondence with the insurance company, and medical records or death certificates that were part of the claim.
Having all relevant documentation on hand allows you to cross-check the insurance company’s claims and see if there might have been an error in their assessment.
Contact a Lawyer for Assistance
If an insurer denies your life insurance claim, you don’t have to face this alone. Challenging a denial can be complex and overwhelming, especially when dealing with insurance companies that may not have your best interests at heart.
Our experienced legal team at Brownfield Dufour PLLC is here to provide the guidance and support you need. We understand the intricacies of life insurance policies and the tactics insurers may use to avoid paying claims. By working with us, you can feel confident knowing experienced professionals are handling your claim.
Schedule a consultation today when you contact us online.