It is rare for insurers to deny or delay paying claims. According to studies in 2013, they rejected only 0.7% of the total value of life insurance claims due to a few reasonable grounds. When the life insurer refuses to pay, it can be a difficult time for your family when you die without leaving them with the financial security that you wanted to provide.
There are a lot of steps that you should take to ensure that you won't leave your loved ones in the lurch. To understand this matter better, you should know some grounds for claims rejection first.
Reasons for Policy Withdrawal and Rejection
One of the most common reason for a denied or delayed life insurance claim is material misrepresentation. It is the failure to disclose your medical history when you apply for life insurance, especially if you die within the policy's first two years. Usually, when applying for life insurance, you will answer questions regarding finances, hobbies, smoking, family medical history, health and more. After issuing a policy, the insurer will have a two-year contestability period where it can rescind the policy because of valuable information that you may have mistakenly gotten wrong or that you lied about in the application. In these cases, your family will only receive the premiums but not the death benefit.
Other reasons include:
● Lapse of a policy because of nonpayment of premiums
● Murder by a beneficiary on the policy
● Suicide within the policy's first two years (after that, suicide is covered)
● Death in the process of committing a felony
In some states like Rhode Island, Missouri, and Kansas, the insurer may deny a claim even if the misrepresentation has no relations to the cause of death. However, some journals say that reasons for rescinding a policy need to be "material." It means that it is directly related to the risk that the insurer assumed during the issuance of the policy.
Insurers may rescind policies and deny claims within the contestability period for the following cases:
● Lies about weight
● Lies about income
● Incorrect answers in the application by an insurance agent
● Avoiding to mention smoking one cigarette a day.
● Not disclosing another life insurance policy
● Misrepresenting status of immigration
● Failing to mention treatment for minor ailments
Courts may sometimes spend claim rejections by misrepresentations in the application. It will cost the family a lot because they will have to pay lawyers so they can assist in dispute settlement. Therefore, it is essential to be truthful when applying so that when the time comes, the claims will not be delayed or denied.
Avoid the Trouble
Here are steps that you should follow to help in minimizing the risk of denying or questioning your family's life insurance claim.
1) Avoid lying on the application for life insurance
Remember that if you die during the policy's first two years, the insurance company may find out that you misrepresented yourself and eventually rescind your policy even if the lie did not have anything to do with your death. It is worth mentioning previous treatment for ailments, indulgence in extreme sports and smoking habits on your application for life insurance.
2) Avoid taking shortcuts when answering application questions
Life insurance applications may be complicated and lengthy, but it is important that you answer each question carefully. Any misunderstanding or oversight can leave your family unprotected.
3) Make sure that you ask if you’re unsure about the meaning of the question
Asking about what the question means will show that you are honest and genuine in looking for protection for your family.
4) Carefully review your application
After you and your insurance agent fill out the form, read it over carefully to ensure that all the answers are correct before you sign them.
It is also important to mention that not all errors in insurance applications are material misrepresentations that may warrant the retraction of the policy. Consult lawyers regarding claim rejections so they can help in settling disputes.
Roper Insurance Services will offer you a unique combination of fantastic service with the lowest rates. If you want to know more about life insurance, call us at 828-697-6709. Click here to get a free quote from us.
Reasons for Policy Withdrawal and Rejection
One of the most common reason for a denied or delayed life insurance claim is material misrepresentation. It is the failure to disclose your medical history when you apply for life insurance, especially if you die within the policy's first two years. Usually, when applying for life insurance, you will answer questions regarding finances, hobbies, smoking, family medical history, health and more. After issuing a policy, the insurer will have a two-year contestability period where it can rescind the policy because of valuable information that you may have mistakenly gotten wrong or that you lied about in the application. In these cases, your family will only receive the premiums but not the death benefit.
Other reasons include:
● Lapse of a policy because of nonpayment of premiums
● Murder by a beneficiary on the policy
● Suicide within the policy's first two years (after that, suicide is covered)
● Death in the process of committing a felony
In some states like Rhode Island, Missouri, and Kansas, the insurer may deny a claim even if the misrepresentation has no relations to the cause of death. However, some journals say that reasons for rescinding a policy need to be "material." It means that it is directly related to the risk that the insurer assumed during the issuance of the policy.
Insurers may rescind policies and deny claims within the contestability period for the following cases:
● Lies about weight
● Lies about income
● Incorrect answers in the application by an insurance agent
● Avoiding to mention smoking one cigarette a day.
● Not disclosing another life insurance policy
● Misrepresenting status of immigration
● Failing to mention treatment for minor ailments
Courts may sometimes spend claim rejections by misrepresentations in the application. It will cost the family a lot because they will have to pay lawyers so they can assist in dispute settlement. Therefore, it is essential to be truthful when applying so that when the time comes, the claims will not be delayed or denied.
Avoid the Trouble
Here are steps that you should follow to help in minimizing the risk of denying or questioning your family's life insurance claim.
1) Avoid lying on the application for life insurance
Remember that if you die during the policy's first two years, the insurance company may find out that you misrepresented yourself and eventually rescind your policy even if the lie did not have anything to do with your death. It is worth mentioning previous treatment for ailments, indulgence in extreme sports and smoking habits on your application for life insurance.
2) Avoid taking shortcuts when answering application questions
Life insurance applications may be complicated and lengthy, but it is important that you answer each question carefully. Any misunderstanding or oversight can leave your family unprotected.
3) Make sure that you ask if you’re unsure about the meaning of the question
Asking about what the question means will show that you are honest and genuine in looking for protection for your family.
4) Carefully review your application
After you and your insurance agent fill out the form, read it over carefully to ensure that all the answers are correct before you sign them.
It is also important to mention that not all errors in insurance applications are material misrepresentations that may warrant the retraction of the policy. Consult lawyers regarding claim rejections so they can help in settling disputes.
Roper Insurance Services will offer you a unique combination of fantastic service with the lowest rates. If you want to know more about life insurance, call us at 828-697-6709. Click here to get a free quote from us.
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