When you purchase a life insurance policy, you typically do it to ensure that your beneficiaries are taken care of financially in the event of your passing. It would make sense to do everything in your power to ensure that in the event of your passing, that there are not any circumstances that prevented your beneficiaries from receiving the death benefit of your policy or otherwise have the claim denied. There are a few reasons why an insurance company would deny your life insurance claim, which will be described below.
Material Misrepresentation
A material misrepresentation is when someone fails to disclose specific information to the insurer that the insurer would consider important in the risk assessment of the insured. Basically, this means that if you are dishonest to the insurer regarding things that were asked about on the initial insurance application, the insurer can deny the claim on the grounds that the policy should not have been issued in the first place. Material misrepresentation can include false statements on the application or any omission perceived to be intentional. The whole point of life insurance is for the beneficiaries to receive the death benefit, so it is important to be as truthful and forthcoming as possible on life insurance applications.
Taking One’s Own Life
When an insured commits suicide, it would make sense for the insurer to deny the claim because of the likelihood or appearance of the insured taking out a life insurance policy with the knowledge that they would take their own life. This policy exclusion is designed to discourage people from taking out life insurance policies and then taking their own life for the purpose of the death benefit being paid to their beneficiaries. There is an exception to this though, which occurs two years after the policy is issued, at which time the insurer deems any suicide by an insured to have not been planned with the intent of beneficiaries receiving the death benefit.
Dying During the Contestability Period
The contestability period for a life insurance policy is a two or three year window (depending on the insurer) after the policy is issued, during which the insurer can perform an extensive review of the insurance application and other information that is deemed pertinent. If the insured dies within the contestability period, the insurer can review the original insurance application, review financial records, and even discuss the medical history of the insured with the insured’s physician. If in this investigation they identify material misrepresentation, evidence of fraud, or things such as pre-existing conditions, they will most likely deny the claim.
These are just the most common examples of reasons why an insurer might deny a life insurance claim. Depending on your particular insurer, there might be more reasons that you should be aware of, so it is in your best interest to read your policy and all of the fine print. This way you can address any potential problems that you notice before they become a potential issue in the future.