A denied life insurance claim usually comes at the worst possible time. Amid grief, stress, and sadness, the last thing a family needs to hear is that their financial security has been put further in question by the decision of a life insurance claim adjustor.
However, a denied life insurance claim does not necessarily mean the end of the line. Many families do not realize they have the right to appeal an insurance company’s decision. You may be able to provide additional documentation and escalate your appeal through internal or external review options to still receive your benefits.
Common Reasons for a Life Insurance Claim Denial
Life insurance denials happen more frequently than anyone would care to think. While one of the most common reasons for a life insurance claim denial is allegations of fraud or misrepresentation, there are other issues or even seemingly minor details that can delay benefits or even cause an insurance company to deny your claim altogether.
Contestability Window
Perhaps the most common reason for a life insurance claim denial is because the death took place during the contestability window mandated by the contract. Under many policies, if the holder passes away during the first two-year window after signing, the company takes it upon itself to scrutinize and deny claims more vigorously. Insurance companies may argue that there were additional factors about the policyholder’s health that were concealed and may refuse to pay for a person’s death during this two-year period.
Misrepresentation of Information
Failing to disclose certain information, whether due to error or intentional misrepresentation, can lead to your claim being denied by an insurer. For instance, if the policyholder was a smoker who did not disclose the habit, or had certain hobbies that are deemed riskier by insurance companies such as mountain climbing, then an insurance company that unearths this information after their death may refuse to make good on the claim. Even if this information does not involve the deceased’s cause of death – for instance, if a smoker was involved in an unrelated car accident – then the insurance company may still attempt to deny a claim due to misrepresentation.
Lapse in Coverage
Sometimes families do not find out that there has been a lapse in coverage due to failure to pay premiums until after they attempt to make a claim.
Cause of Death Excluded from Coverage
Certain deaths, such as from some natural disasters or acts of war, are excluded from policy coverage. Other deaths, such as those during an illegal act like robbery, may also be excluded.
Self-Inflicted Wounds
Many policies do not cover death by suicide or self-harm.
Drug and Alcohol Use
Instances of a drug overdose or alcohol poisoning may also be excluded from coverage.
Death Contested Overseas
International red tape may allow an insurance company to avoid paying either a contested claim or a claim that takes place in an area that is not covered by the policy. Before taking a trip abroad, it is wise to ensure that your life insurance policy does not exclude coverage in the area to which you are traveling.
Insufficient Proof of Death
Disappearance with insufficient proof of death may be considered contestable by an insurance company.
Failure to Name a Beneficiary
You may consider that the point of life insurance is to provide for family members or named beneficiaries after a loss. However, when policies do not specify a beneficiary or if the beneficiary on the policy has pre-deceased the holder, then an insurance company may attempt to deny payments, or the payments may be tied up in the deceased’s estate. In this case, the life insurance benefits may need to pass through probate and be examined by creditors before they become available.
Beneficiary Dispute
If a spouse or ex-spouse of a policy holder disputes any detail of the policy, then the family may find themselves struggling to receive benefits.
Bad Faith Tactics
Unreasonable delays, excessive investigation, or aggressive tactics from an insurance company may signal that they are attempting to make a bad-faith denial of your claim. Bad faith denials constitute a breach of contract and can be challenged and even reversed through a court of law. Speak to a life insurance attorney if you suspect a company or investigator is using bad faith tactics to attempt to prevent you from receiving benefits.
Is It Worth It to File an Appeal for a Denied Insurance Claim?
Yes, it is worthwhile to appeal a denied insurance claim. While 94% of insurance denials are never appealed, studies show that approximately 70% of insurance denials are granted. Taking the time to hire an expert to represent you and your family with a denied life insurance claim can make all the difference in the world.
By building a compelling case and escalating the claims process for further review, you may be able to see a reversal of the initial denial and start receiving benefits.
How to Start the Appeal Process for a Life Insurance Claim
You have the right to escalate your claim for further internal review, as well as request an external review of an insurance denial under certain circumstances. With an external review board, the insurance company will no longer be the final determination of whether or not your claim is paid out. Speak to an expert life insurance attorney if you need help gathering documentation, negotiating with insurers, or otherwise building your case for a strong appeal.
Review Your Life Insurance Policy
Take the time to read over your life insurance policy contract or bring it to an attorney for any components you do not understand. Familiarize yourself with any exclusions or limitations to your policy, as well as any terms or conditions that were agreed to upon signing.
You should also read the denial letter thoroughly to ensure that you understand on what grounds your claim is being contested, investigated, or outright denied. You are entitled to a copy of an insurance denial in writing. If you received your denial over the phone, request a hard copy of the denial that outlines the insurance company’s reason, and bring these documents to your first consultation with an insurance denial lawyer.
Contact the Insurance Company
You may be able to resolve the situation before filing a formal appeal by speaking directly to the insurance company’s claims department. There may be simple clerical errors or missing information that have led to someone issuing a denial that can be re-opened. Contact a supervisor if possible to address the situation before filing your appeal to ensure that there is not a swifter path to resolution.
If you do need to move forward with your appeal letter, be sure to verify receipt of your letter with the claims board. If you wish to send in a hard copy of your letter, be sure to mail it with tracking information or request verification upon receipt. You will need to include all of the information that the insurance company will need to review and escalate your claim.
You should include clearly, in writing:
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Your policy number and all claim information: A written letter to the insurance company should include the policy number, the policyholder’s name, the date of death, and the date of your first communication with an adjuster.
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The reason for your appeal: Some companies advocate for writing “this is not an appeal” at the top of all prior communication such as requests for information, so that it does not get filed together. To begin an appeals letter, clearly state that you are appealing the company’s denial, and list your reason(s) why you believe the denial was incorrectly issued.
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Supporting documentation: In the letter, mention all of the documents you are attaching that support your claim to minimize the risk of an attachment getting lost early on in the process. You might consider including documentation like medical records, a coroner’s report, and proof of timely payments.
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Dispute grounds: An attorney may be able to help you include additional information like the grounds for dispute. These might include a misunderstanding of exclusions, miscommunication between brokers and family members, or pre-existing conditions that were misdiagnosed.
Gather Your Relevant Documents
In addition to the original life insurance policy and denial letter, you should also make sure to have on hand the life insurance application as filled out by the policyholder and any additional communications any party has had with the insurance adjuster. Finally, you will need to provide the death certificate for the policyholder, as well as any applicable medical records.
Talk to a Lawyer
A life insurance dispute lawyer is your expert guide throughout every step of the appeals process. Filing an appeal generally means moving through the internal process before you can escalate for external review. Your attorney can ensure that you file on time and correctly and that you include all relevant documentation.
They may also be able to advise you about additional grounds for dispute that you may not be able to spot on your own, such as a pattern of similar denials from the company, unenforceable terms or conditions in the agreement, or other concerns. They can spot bad faith denials and illegal practices and ensure that you fully understand everything that you might have already agreed to in prior communications, as well as prevent you from signing away your rights in further review.
If you are unsure about affording a lawyer, most initial consultations are free. You will be able to share your concerns and see if the firm you choose can take your case on a contingency basis. This means that you will not pay for the firm’s services until after they win you a settlement, at which point they will be paid from an agreed-upon percentage of your awarded funds.
What Do You Do if Your Appeal Is Also Denied?
When you initiate your appeal, one important question to ask is how many times you can request a review. Insurance policies offer different structures for appeal, and sometimes you may be able to appeal a denial more than once.
It is sometimes necessary to move through every step of the internal review process to qualify for external review. An external review is traditionally a panel of experts who are randomly assigned by an Insurance Commissioner’s Office, an independent review organization, or by the state or federal government. An external review traditionally takes place before more than one independent auditor, and their decision is traditionally final unless you can file an additional lawsuit for bad faith practices.
You must file a request for external review in writing no later than 4 months after you receive a denial from your insurance company’s appeals process. There may be a small filing fee associated with requesting external review, and you may be asked to provide additional documentation for your claim.
Different Life Insurance Policies You Can Consider
Some people are denied life insurance coverage due to pre-existing conditions or because they fall into what is considered by the industry a “high-risk” category. This can include factors like:
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Having diabetes, obesity, or being diagnosed with prior serious conditions like heart disease
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Having a criminal record or history of DUIs or speeding tickets
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Failing a drug test
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Poor results from your life insurance medical examination
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Being a smoker
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Having a job that is considered dangerous, like roofing
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Having hobbies that are considered dangerous, like cross-country skiing or skydiving
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Bankruptcy or poor credit
If you have been denied based on outdated or incorrect information, you may be able to share updated medical files or expunges to your record to resubmit. For instance, if you have been denied based on a previous credit report, changes to your credit score can impact your eligibility. You may also be able to work with your financial professional to find a different plan that works for your lifestyle or consider if your employer offers life insurance plans for which you can qualify. Never offer the wrong information to an insurance company just to qualify for a policy.
Whenever possible when facing an insurance denial, always request more information. As a consumer, you have the right to know the “why” behind an insurance company’s decision. Understanding why you have been denied coverage can save you time and effort, and ensuring that you know what you are signing up for can also save your beneficiaries trouble and heartache down the line, should they ever need to make a claim against your insurance policy.
Talk to a Life Insurance Dispute Lawyer for Help with Your Claim
If you need help fighting a denied claim, an insurance appeals attorney can ensure that you build the strongest possible case for compensation. Know that a denial is not necessarily the end of the road for you and your family during this difficult time. Contact an insurance denial attorney for guidance and help understanding how to build a successful life insurance appeal.
