There Are Several Reasons A Life Insurance Claim May Be Denied
Michael Babboni
Insurance Coverage
It's an unfortunate fact of life that insurance companies, despite essentially selling peace of mind, don't always follow through on their promises. Some residents of Florida are all too familiar with insurance companies receiving a claim for auto damage, or even injury and the associated costs for medical treatment, and then denying the claim, leaving people who paid their premiums faithfully, every single month, out of luck despite their loyalty.Sadly, this can sometimes happen even with something as critical as life insurance. Life insurance is supposed to be the ultimate peace of mind for the policyholder, a promise that, should anything happen to them, the family members they leave behind, without that source of income, will still receive money and be financially safe, even if they have deal with the social and emotional loss of policyholder passing away.
But why would a life insurance company deny a life insurance claim if the conditions have been met? Here are a few reasons that a life insurance company might not honor a claim despite making the promise.
Suicide
While it's tragic that someone would take their own life, in some instances, there may be a monetary motivation as well, even though the intent may be to care for loved ones. One of the best ways to guarantee a family receives life insurance money is to take control of the circumstances of the death, especially if the money is badly needed.
This is one reason why many insurance companies have specific regulations regarding suicide. Most companies will not, for example, pay out life insurance money on suicide if the suicide occurs the same day the policy has been approved. Some might not honor a life insurance policy at all if suicide was the cause. In contrast, others have waiting periods—sometimes two years or more from the start of the policy—before coverage will be extended to a suicide.
Death On Foreign Soil
As surprising as this may be to hear, sometimes life insurance doesn't provide coverage outside of the USA. While travelers, for example, may opt for specific types of travel insurance for death and injury, there are instances where death in another country may be a problem.
An American who takes up temporary residence in another country, for example, may run into this issue. Someone who is temporarily transferred to work in an office in another country for a few months may run into trouble should death occur. Be careful about looking into the exact conditions for life insurance as they may no longer apply to people who aren't currently in residence in the USA at the time of death.
Fraudulent Information
One circumstance that can quickly result in a claim denial is if the insurance company believes it was operating on false information, especially if the suspicion is deliberate lying was involved. For example, someone passed away due to lung cancer. It was later found that the deceased was a heavy smoker, even though insurance application forms claimed the deceased was a non-smoker. This is a red flag to the insurance company.
When there is any discrepancy between a cause of death and what appears to be conflicting information provided by the policyholder, the insurance company may suspect fraud is involved. This isn't just restricted to illness either; failing to mention participating in dangerous activities regularly, such as skydiving, may also be grounds for fraud.
War Casualty
This doesn't apply to soldiers who have insurance mechanisms to care for themselves and their family members. In this case, insurance companies may have "wartime exclusions" for ordinary civilians that find themselves in a wartime situation. In most cases, the exclusion will only apply if people knowingly go to a destination currently embroiled in a military conflict. For example, a journalist or news crew that visits a warzone may have insurance claims denied.
The same applies to people who visit a warzone for other reasons. So even if a person flies to a warzone to ensure the safety of relatives, a death, if it does occur, may result in a claim denial by the insurance company. In this case, they may claim that knowingly entering a dangerous area means they absolve the insurance company of their obligations.
Crime
If a person passes away while committing criminal activities, this can sometimes also result in a claim being denied. A person visiting someone's home who gets up to use the bathroom late at night and is accidentally shot by the homeowner thinking there's a burglar would receive full coverage for the family from the insurance company. There might even be a wrongful death lawsuit involved.
However, someone breaking into a home and being shot by a homeowner in legal self-defense could have the life insurance claim denied. Then there are other, more malevolent instances where an insurance company may contest a claim even if it's legitimate. If this has happened to you, especially with wrongful death, talk to a wrongful death attorney.