Key takeaways
- Life insurance claims can be denied for reasons like missed payments, inaccurate information or policy exclusions. Knowing these risks upfront can help you avoid unpleasant surprises.
- If you misrepresent details about your health, job or risky hobbies, your insurer could reduce your payout — or deny the claim entirely.
- Most policies have a contestability period, usually the first two years, where insurers take a closer look at claims and may deny benefits under certain conditions.
- The best way to avoid claim issues? Be honest on your application, stay on top of your policy and make sure your beneficiaries understand the terms.
Losing a loved one is hard enough, but dealing with a denied life insurance claim can make an already difficult time even more overwhelming. When a policyholder passes, it’s up to the beneficiaries to file a claim to receive the death benefit. But what if the insurer denies a claim? While every policy has its own rules for payouts, a denial doesn’t always mean the end of the road. Bankrate’s insurance team breaks down common reasons claims get rejected and walks you through the steps to challenge the decision — so you have a better chance of securing the benefits your loved one intended for you.
Why was my life insurance claim denied?
When denying a claim, life insurers typically cite policy delinquency, material misrepresentation, contestable circumstances or documentation failure as a reason for doing so. Here is what you need to know about each of these circumstances.
Policy delinquency
For beneficiaries to receive the death benefit, a life insurance policy must remain active — meaning premiums need to be paid on time. If a policyholder falls behind on payments and the policy lapses, coverage isn’t in force at the time of death, making it one of the most common reasons for claim denials.
This point is especially important for cash value policies, such as whole life or universal life insurance, which demand careful monitoring. Although these policies accumulate cash value, policyholders must consistently pay premiums and ensure that withdrawals or loans don’t diminish the policy’s value to the point of lapse. Without proper oversight, a policyholder might unknowingly leave their loved ones without coverage. If beneficiaries believe the policy was active at the time of death, they should contact the insurer to confirm its status and explore any available reinstatement options.
Material misrepresentation
When initially applying for a life insurance policy, it is crucial that the policyholder is honest and forthcoming about their medical history and health status. Whether it is a heart murmur, a history of smoking or information about weight, untrue statements on an insurance application may jeopardize the entire policy. Lying on a life insurance policy carries with it serious consequences, one of which includes potential claim denial for the beneficiaries following the death of the insured.
Other common misrepresentations include:
- Lying about income sources
- Non-disclosure of another life insurance policy
- False information about occupation or hobbies
- False or incomplete information about medical history
Contestable circumstances
Life insurance policies contain specific exclusions that can lead to a denied claim, especially during the contestability period, which usually lasts two to three years from the policy’s start date. During this time, insurers have the right to investigate claims and refuse payouts if the cause of death is not covered.
Exclusions often vary by policy type. For example:
- Traditional life insurance: Claims may be denied for suicide during the first couple of years or for death resulting from illegal activities.
- Accidental death and group life insurance: These policies often exclude deaths involving drugs or alcohol. If the insured was under the influence at the time of an accident, the claim might be rejected.
- Guaranteed issue life insurance: These policies typically feature a graded death benefit period. If the insured dies of non-accidental causes within the first two years, the beneficiary may receive only a refund of premiums paid rather than the full death benefit.
Policyholders and beneficiaries should review exclusions carefully to understand which circumstances could trigger a claim denial. If a claim is denied, it may be possible to appeal by providing additional evidence or clarifying the policy terms with the insurer.
Documentation failure
A life insurance claim can be denied if the necessary documents are incomplete or missing. Typically, insurers require at least a certified death certificate to start processing a claim. Depending on the circumstances of death, some policies might also call for additional paperwork, such as proof of identity, medical records or autopsy reports.
If a claim is denied due to missing or inaccurate documentation, beneficiaries have the option to refile once they’ve gathered all the required paperwork. It can be helpful to review the insurer’s requirements carefully or talk to a representative to get a clear understanding of all the information they require.
Taking those steps beforehand can help avoid delays in receiving the death benefit.
Why the contestability period matters
Contestability in the first couple years of a new life insurance policy is not unlike a probationary period. During the contestability period, an insurer retains the right to review the initial policy application and death benefit for possible misrepresentations or life insurance fraud.
While an investigation may delay payment of a death benefit, insurers should pay on the policy so long as investigations lead to no conclusion of wrongdoing. In the case of a homicide, for instance, insurers may provide the payout only after police clear policy beneficiaries.
What to do if a claim is denied
Receiving a life insurance claim denial letter may be stressful for beneficiaries who are financially dependent on life insurance benefits. Depending on the reason for the claim denial, you may have some options to contest the denial. In cases with obvious mishandling of claims, your state’s department of insurance and an attorney may offer helpful resources to argue why the claim should be paid out.
Contact the insurer
When a life insurance claim is denied, beneficiaries usually start by contacting the insurance agent — although contacting the insurer directly is an option. The denial letter should explain the reason behind the decision. However, if the explanation seems vague or lacks detail, beneficiaries can ask for further clarification.
Providing additional documentation may help contest the denial. For instance:
- Proof of premium payments might refute a lapse-related denial.
- Medical records or autopsy reports can address exclusions related to the cause of death.
- Employment records may be required for group life policies.
For employer-sponsored group life insurance, beneficiaries typically have only 60 days to appeal a denial, so prompt action is necessary. If the agent is unresponsive or unable to assist, the next step would be to contact the insurer’s claims department directly.
Contest the rejection
Beneficiaries with a denied benefit may be able to appeal the claim by presenting evidence according to the process established by the insurer. This process and how long it takes will vary by insurer. In some cases, denied beneficiaries may want to contact their state’s department of insurance or attorney general for their expertise in insurance navigation. Some states even employ insurance appeals specialists, and state-level representation may have substantial weight to an insurer.
For more complex situations — especially those involving contested exclusions, allegations of misrepresentation or unclear policy terms — it might be wise to hire an attorney experienced in insurance disputes. Legal professionals can guide you through negotiations with the insurer, help you file a formal appeal or take full legal action if needed.
How to avoid a life insurance claim denial
Avoiding a claim denial in the first place may save you the headache of appealing a denied claim. Although the burden of avoiding a claim denial typically lies with the policyholder, these best practices may help ensure a smooth claim payout process.
- Be forthcoming on your application: While omitting some information may seem like a quick way to get a cheaper life insurance rate, it may harm your beneficiaries in the long run. Being honest on your life insurance application may help you avoid claim denials due to material misrepresentation.
- Understand the terms and conditions: It may be a good idea to meet with a licensed life insurance professional before committing to a policy. A life insurance agent or broker can guide you through the different types of life insurance policies and help you grasp the finer points of your chosen contract.
- Arrange for automatic payments: Paying your premium automatically all but eliminates the chances of you forgetting to pay and causing your coverage to lapse — this doesn’t, however, forgo the need to monitor the performance of cash value policies.
- Review your application: Before you submit your final life insurance application, carefully review it to help catch any errors.
- Talk to your beneficiaries: Making sure that your beneficiaries understand your policy and how it pays out can be a hard conversation, but one that may be worth having to help facilitate the death benefit payout.
- Be cautious with policy loans: If you have a permanent life insurance policy with cash value, taking out a loan against it accrues interest. If the loan balance grows too large, it could reduce the death benefit — or worse, cause the policy to lapse entirely.
Frequently asked questions
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