Many individuals purchase life insurance to provide for their loved ones even after that are gone. Unfortunately, it is all too common for insurance companies to deny life insurance payouts. Check out a few of the most common reasons that insurance companies deny payouts for their life insurance policies.
1. The Policy Holder Forgot to Pay the Premium
Many insurance companies give their customers the option to make annual or quarterly payments on their policies. Since this is not a regular bill, the policyholder may have simply forgotten to make the premium payment, causing a lapse in coverage.
Though there is little you can do about this after the fact, if you are currently shopping for a life insurance policy, see if the company will let you opt to have your payment automatically charged to a credit card or deducted from your bank account. This ensures payment is always made in a timely manner.
2. The Policy Holder Was Dishonest When Filling Out the Application
It is important to be as honest as possible when filling out an application for life insurance. If the life insurance company believes that you were intentionally dishonest, it can deny a payout by claiming that you provided false information.
False information is a special concern for relatively new policies (less than two years old). Many insurance policies have a contestability period that permits the company to thoroughly investigate claims that fall within this window. If they find false information on your application, even if it is seemingly minor, they may try to deny the claim.
3. The Cause of Death is Not Covered by the Policy
Older life insurance policies are notorious for having specific causes of death that they refuse to cover. Deaths caused by committing a crime, those that occur during extreme activities, and those that happen while serving in the military are a few situations that a policy may exclude.
Newer policies tend to have much fewer exclusions. Some do refuse payouts if the policyholder committed suicide. Make sure that you thoroughly read your paperwork so that you understand what situations your policy does and does not cover.
4. The Beneficiary Made a Mistake Filling Out the Paperwork to Make a Claim
If the beneficiary of a life insurance policy makes a mistake when filling out the paperwork to claim a payout, this can cause the life insurance policy to deny the payout. Fortunately, this cause of denial is easily remedied by properly filling out the paperwork or including any required documentation. Some policies require a certified death certificate and autopsy report (if applicable) when claiming a payout.
Don't let an insurance company deny you the money you are entitled to. Instead, contact a qualified insurance dispute attorney who specializes in insurance disputes.