In some ways, a life insurance policy feels fairly straightforward. A person purchases the policy while they are still alive and names their intended beneficiary. When they pass away, proof of death is provided to the life insurance company, which then pays out the policy.
But the reality is that there are still situations in which a life insurance claim will be denied. Let’s look at some reasons why this could happen.
The manner of death triggers an exception
To begin with, many life insurance policies have clauses saying that the company does not have to honor the policy if the person dies in a certain way. For instance, if they pass away from suicide or during the commission of criminal activities, then the life insurance policy may not be binding.
The policy lapsed before the owner died
One common issue is that the policyholder did not pay all of the premiums or allowed the policy to lapse because of missed payments. Even if they did not realize that this happened, it could be a reason why the payout is denied. The person who purchases the policy must always stay up to date on premium payments so that the payout will be made to the beneficiary.
The insurance was term life only and has expired
Many people purchase term life insurance policies. This means that there is a set term from the very beginning, and the policy only lasts that long. For instance, the policy may last for the next 20 years. But once it reaches that deadline, it expires, and the person would have to purchase a new policy.
Have you run into complications making a life insurance claim, or are you concerned that the life insurance provider is acting in bad faith? In either case, be sure you know what legal steps to take.