Life insurance policies provide financial protection for beneficiaries and peace of mind for the insured. Though there are many , the overall purpose of remains the same: protect the policy’s beneficiary from financial hardship in the event of the insured’s death.
Regardless of the type of life insurance policy or form of death benefit payment, the last thing anyone wants to worry about when a loved one dies is whether his or her life insurance claim will be denied. Unfortunately, however, it’s not uncommon for life insurance companies to deny claims. alone, over 5,000 life insurance claims were denied and nearly $372 million in death benefits were withheld from beneficiaries.
There are many reasons that can lead to a denial. One of the for a life insurance company to deny a claim is because the insured failed to disclose a pre-existing condition during the process of purchasing their life insurance policy.
Why do life insurance companies need to be aware of pre-existing conditions?
When an individual applies for a life insurance policy, insurance companies investigate the applicant’s medical history in a process known as “”. The purpose of this process is to allow the insurance company to assess the level of risk associated with insuring the applicant and set the policy’s premiums accordingly. Many factors (such as age, demographics, etc.) affect the cost of a life insurance policy. However, (such as cancer, heart disease, or diabetes) will significantly impact an insurance company’s decision whether to insure an individual and at what rates.
If the applicant fails to disclose a pre-existing condition, their life insurance premiums may be substantially lower, though this omission – intentional or accidental – puts their beneficiaries at risk of having their death benefit denied.
If you have submitted a life insurance claim that has been denied due to a pre-existing condition, continue reading to learn the six most important things your insurance company might not be telling you:
1) You always have the right to an insurance company’s denial. Any time an insurance company issues a denial, they must notify you in writing and clearly state the reason for their denial. Your denial letter should also explain the insurance company’s specific process for submitting an appeal. If it does not, contact your insurance company to inquire about their appeals process and timeline and be sure to always keep detailed records of your communications.
2) Life insurance policies have a two-year “contestability period”. This refers to a during which life insurance companies can investigate the insured’s initial application for omissions, mistakes, or fraud in a process known as retroactive or post claim underwriting. If your insurance company discovers an undisclosed pre-existing condition or other discrepancies during this time, your life insurance claim can be denied.
3) Insurance companies can only deny a claim for “”. Insurance companies tend to be particularly fastidious about errors found during the contestability period. However, they can only deny your life insurance claim if they discover a mistake or an omission that would have caused them to charge a higher premium or reject the insured’s initial life insurance application altogether. Even unintentional mistakes can cause a life insurance claim to be rejected if it is considered a material misrepresentation.
4) Any undisclosed pre-existing condition can cause your life insurance claim to be denied. As long as it would have affected your insurance company’s decision to offer coverage, any pre-existing condition that is discovered during the contestability period can cause your life insurance claim to be denied – even if it is completely to the insured’s cause of death.
5) A policy’s contestability period will restart if premiums aren’t paid. Contestability periods usually end within two years after the insured first purchases their life insurance policy. However, it’s possible that a policy’s contestability period had to be from the beginning of its two-year timeframe. This occurs if the insured fails to make their premium payments, which causes the life insurance policy to essentially be put on hold. Once they begin to pay their premiums again, the policy is reinstated and a new contestability period begins.
6) Your claim cannot be denied after the contestability period. After a policy’s contestability period has ended, a life insurance claim is considered incontestable. This means that insurance companies are from denying your life insurance claim on any basis other than nonpayment of the policy’s premiums.
If your life insurance claim was denied due to a pre-existing condition, speak to one of our helpful claim advisors today to see if we can help.