How to Choose a Life Insurance Beneficiary
Losing a loved one is devastating — and a denied life insurance claim only makes a bad situation worse. There are a number of reasons why this may occur, many of which can be avoided with a little due diligence.
Here are some of the most common reasons why life insurance claims get denied — and what you can do about it.
First and foremost, a reputable life insurance company won't deny your life insurance claim without just cause. That makes it all the more important to choose a trustworthy life insurance company from the beginning.
But if you filed a life insurance claim on a loved one's policy and it was denied, it could be due to one of the following reasons:
If a policyholder doesn't pay his or her premium on time, it can cause the policy to become invalid. He or she may have told family members about the life insurance policy — and then later stopped making payments for one reason or another.
If the policyholder fabricated information, especially pertaining to his or her age or health, it could impact a beneficiary's ability to collect the benefit amount. Failure to disclose relevant, personal information — such as a major health issue, a major health issue in the immediate family, foreign travel, or potentially dangerous lifestyle activities — could also be a reason for a denied life insurance claim.
The policyholder may have gotten divorced and re-married, but forgot to change his or her life insurance beneficiary. In these instances, you might consult a lawyer, who can review the rules in your state and the terms of your divorce agreement and advise accordingly.
Accidental Death and Dismemberment (AD&D) Insurance, for example, is designed to cover specific circumstances, such as dismemberment or death that resulted from an accident. AD&D insurance doesn't, however, cover health-related deaths. This makes it all the more important to ensure that you have the coverage you need, which could mean buying life insurance and AD&D insurance.
There is a short period of time in which life insurance companies can investigate and deny claims (typically one to two years). It begins from the moment the policy goes into effect.
Uncovered events and exclusions should be spelled out in the terms and conditions of your life insurance policy. Before signing any contracts, make sure you read and understand the fine print.
There are some steps you can take now to save your loved ones from the headache of a denied life insurance claim. Make sure you:
Ask your life insurance company why your life insurance claim was denied and if there's anything you can do to help resolve the problem. In some instances, the life insurance company may need additional information from you that was missing from the original claim, before you receive your life insurance payout.
Should the denial stand, you may consider appealing it. Gather the facts and supporting documentation to support your claim and submit them to the life insurance company.
If the life insurance company is completely unresponsive, you may consider seeking support from your state's department of insurance.