Life Insurance Policy Claim Denied?
Have you recently lost a loved one and now a life insurance company is refusing to pay policy benefits?
Providing for the financial security of your family after you are gone is a top concern of most breadwinners, and life insurance is one of the main ways most people choose to gain this peace of mind. Life insurance can be critical to helping surviving family members replace lost income, keep up with mortgage payments, and pay estate taxes and other probate costs without having to sell off property or spend their inheritance on a funeral, burial and other final expenses.
Unfortunately, many life insurance beneficiaries are shocked when they file a claim, only to discover that the insurance company refuses to pay. You’ve counted on this benefit all your life, and now that you finally need it, it’s simply not there. At Baldwin Legal Services PLLC, our lawyers know Michigan insurance law and life insurance policies. We know when you’re being treated fairly and when you’re not. We’ve spent decades devoted to helping families receive the benefits of insurance they have purchased, despite the roadblocks thrown in their path by bad faith insurance practices. If your Michigan life insurance policy claim has been denied and you don’t know what to do, call Baldwin Legal Services PLLC for a no-cost, confidential consultation. We’ll take the time to understand your situation and let you know how we can help. If your insurance company is mistreating you, we’ll do what it takes to make sure they treat you right.
An Incentive to Deny
Because they make more money when they deny claims, insurance companies often look for any opportunity to delay or deny life insurance coverage. They may accuse the deceased policyholder of fraud or misrepresentation, examine the application in an attempt to retroactively rescind or cancel the policy, or look for improper policy exclusions that would allow them to deny the claim.
In some cases, insurance agents or brokers misrepresent the facts on an application, either accidentally or sometimes just so they can make a sale. If a negligent agent or broker is responsible for your life insurance coverage dispute, we can help.
How Does Life Insurance Work?
The basic concept of life insurance is simple enough. Your policy is a contract between you and the insurer where you agree to pay a certain amount of money each period (usually monthly, semi-annually, or annually), and in return, the insurance company promises to pay a certain amount of money to the beneficiary or beneficiaries named in your policy if you die.
The two most common types of life insurance are term policies and whole life policies. With a term policy, your policy stays in effect for a certain length of time depending on the term you choose (typically 10, 20 or 30 years), so long as you continue to pay premiums when they come due. At the end of the term or if you stop paying premiums, your policy expires and is no longer effective. With a whole life policy, you build value (equity) over time through your premium payments. If you stop paying premiums at some point, you will have a cash value built up that is yours to redeem by surrendering the policy. Whole life then acts as both a life insurance policy and a financial investment. Some whole life policies even pay dividends from time to time, which can be used as cash or reinvested to lower premiums and increase the value of your policy.
There are other types of permanent life insurance besides whole life, such as universal life, variable life, and even variable-universal life insurance policies. Accidental death and dismemberment (AD&D) policies also provide a death benefit, although these benefits are limited to accidental death only and therefore apply much less often than term life or whole life policies. AD&D insurance provides benefits for accidental injury as well and is worth considering in addition to life insurance or long-term disability insurance, but it is not a replacement for either.
Besides purchasing life insurance on your own, you may also be covered as a military service member (SGLI), a federal employee (FEGLI) or as a fringe benefit through your job. Many employer-sponsored plans are governed by ERISA, a federal law placing additional rules on covered life insurance policies. One common thread regardless of the type of coverage is that life insurance policies are complex legal documents stuffed with technical language that insurance companies sometimes hide behind when it comes time to pay a valid claim.
How are Life Insurance Claims Mishandled?
Not all life insurance companies are created equal, and not all life insurance claims are treated fairly. Insurance companies will sometimes go to great lengths to find a way out of having to pay, especially if the claim is large. While there are many different tactics insurance companies use to avoid paying claims, some of the most common are listed below:
Material Misrepresentation – This is the most common reason for denial of a claim. The insurance company asserts that the policyholder either lied or deliberately omitted essential information about their insurability. While some denials might be valid, such as a policyholder not revealing a brain cancer diagnosis one month before they applied for life insurance, others are not. Insurance companies will often grasp onto an insignificant mistake contained on an insurance application, for example when the insured last saw a doctor, and claim it was a material misrepresentation, and use it to deny a claim. However, unless the mistake was “material to the risk” such mistakes are not properly used to deny claims.
Lapse – The most common reason for a lapse in policy coverage is the failure to pay premiums. Sometimes, premium payments are missed unintentionally. If the failure to pay the premiums is the fault of the insured, there may be nothing to do to fix the problem. However, often, the insurance company does not comply with policy terms regarding sending out premium and lapse notices, which will bar them from denying coverage. Other times, they will send premium notices to the wrong address, which will also prevent them from denying coverage. They may claim payment was never received or that it was not paid on time, or there may be a dispute over the amount of premium needed to keep a policy in force. You may know you paid, but proving the facts surrounding an alleged lapsed payment can be difficult, especially if the deceased insured was the one in the family responsible for making payments and managing the family’s finances.
Evidence of Insurability – Insurance companies often deny claims based on the failure of a policyholder to provide a statement of good health. Also known as “evidence of insurability” (EOI), this is a requirement in some life insurance policies that the policyholder provide additional information to the insurance company to demonstrate that they are insurable and eligible for coverage. This may include medical exams, answers to health questions, or a review of the policyholder’s medical history.
The purpose of EOI is to provide the insurance company with the information necessary to make an informed decision about the policyholder’s insurability and to ensure that the policy provides the intended coverage. However, insurance companies very often take premiums without bothering to see if they have received the required evidence of insurability. When the insured dies, even though premiums have been paid, they will try and deny coverage.
Delay – Another example of bad faith insurance is when insurers cause an unreasonable delay in paying benefits. One common tactic is to continually submit requests for information from you before they make a determination. These requests may involve information you literally cannot get your hands on (and they know it), or they may simply be requesting information for the sole purpose of using it against you to deny your claim. You would think that very little information need be provided to submit a claim (such as a death certificate), but life insurance policies can be incredibly lengthy, complex and highly technical documents with hidden traps built in that the average consumer never knows about until making a claim.
Inherently Dangerous Activity – Some life insurance policies include clearly worded exclusions that state a policyholder who dies while participating in a specific type of activity will lead to denial of a claim. Such activities might include sky diving, bungee jumping, rock climbing, or scuba diving. However, some policies have vague language which leads a claims administrator to declare a particular activity as inherently dangerous when it may not be, for example, mountain biking or horseback riding.
What if Your Claim is Denied Because of a Beneficiary Dispute?
When there are competing claims filed by different individuals who believe they are the rightful beneficiary of the policy, the life insurance company wants to absolve itself of any legal jeopardy. The company files a civil action in this situation called an “interpleader action” and awaits resolution of the beneficiary dispute. The hope is that the dispute reaches an amicable end, and the insurance company pays the life insurance claim to the rightful beneficiary. However, sometimes, the dispute goes to court. All the while, the life insurance payout will remain in the court’s escrow account, awaiting the outcome of the trial. Laws governing interpleader actions may vary between states as well as at the federal level.
Interpleader actions arise when:
- A couple gets divorced. After the divorce, the insured may forget to change the beneficiary from the ex-spouse to another party. When the insured dies, both the ex-spouse and current spouse may believe they have a rightful claim to the life insurance policy payout.
- No beneficiary is named. In this situation, there may be multiple immediate family members who believe they should be the beneficiary, such as a spouse or children of the insured.
- Beneficiary changes may be fraudulent. If a change is made at the last minute or when the insured is not mentally competent, it can lead to a dispute over who should be the beneficiary. In other situations, a party may argue that a beneficiary change was made by the insured while they were under duress.
If your life insurance claim was denied because there is some type of beneficiary dispute, speak with our attorneys. We will provide you with guidance on your legal options and help you fight for any life insurance payout you deserve.
How Life Insurance Denial Attorneys Can Help You
Fighting an insurance company can be a daunting challenge. There are often specific laws and procedures that must be followed to preserve and maximize your rights. Communicating with a life insurance company without a lawyer may result in information that does not maximize your claim.
We have extensive experience fighting insurance company claim denials. We know how insurance companies use interpretations of generalized policy language to deny claims. We know how they use broad exclusions to deny life insurance claims such as claiming certain deaths are suicide or caused by an excluded illness.
Our life insurance attorney has a Master of Laws (LL.M.) in Insurance Law and knows how to protect you from the insurance companies and to present your claim in the best way possible to ensure your rights are protected and that you get the maximum compensation available. Please call 877-886-1441 or contact us online to schedule a free consultation.
Upon acceptance of your case, our team of experienced life insurance attorneys will:
- Review policy terms and provisions to determine coverage and exclusions
- Review denial letters and correspondence from an insurer to identify reasons for a delay or denial
- Negotiate with your insurer to get you a payout on a life insurance policy when there is a dispute
- Pursue a claim in court against an insurer that is acting unreasonably or dishonestly in delaying or denying the payment of a valid life insurance policy
- Investigate claims and allegations made by an insurer in denying a policy to refute or cast doubt on those claims
Insurance companies are staffed by experts, consultants, and lawyers who look out for the insurer’s profit margin. The more premiums an insurer collects and the less benefits the insurer pays, the better the company does. The insurer’s interests are at odds with yours, and you need your own advocate looking out for you as you make your claim after a death.
Contact Us Today
Has your loved one’s life insurance death benefits claim been denied? Our life insurance attorney has a Master of Laws (LL.M.) in Insurance Law and knows how to protect you from the insurance companies and to present your claim in the best way possible to ensure your rights are protected and that you get the maximum compensation available. Please call 877-886-1441 or contact us online to schedule a free consultation.
If you don’t receive the full amount from the policy that’s due, there is no fee for us. We are here to help you.