Nothing can prepare you for the death of someone you love dearly. However, if you’re a beneficiary of that person’s life insurance policy, you can at least use the policy’s tax-free proceeds to settle their affairs, pay off any debts that outlived them, and replace the income they’ll no longer earn — if the life insurance company accepts your death claim, that is.
It’s true that life insurers accept most death claims. But it doesn’t accept them all, and the process is far from a formality.
Insurers deny life insurance claims for all sorts of legitimate and not-so-legitimate reasons, from nonpayment of premiums to death by suicide early in the policy term. If your loved one’s insurer denies your claim, you need to understand your options and decide what to do next.
What to Do if Your Life Insurance Claim Is Denied
The death of a loved one is already a life-altering event. Left unaddressed, a denied life insurance claim can be life-altering too, at least in a financial sense.
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Fortunately, life insurance denials aren’t always final. You’re within your rights to appeal the insurer’s decision, and if you make a persuasive case, you could get it reversed.
Follow these steps to evaluate your denied claim and pursue your appeal.
1. Review the Life Insurance Claim Denial for Common Reasons Life Insurance Companies Deny Claims
Life insurance companies typically notify beneficiaries of denied claims via an official snail-mail letter. If you created an online account as part of the claims-filing process, your loved one’s insurer might also send the notification via secure electronic message.
If for some reason you don’t receive an official notification, request it.
Read this letter carefully and in its entirety. Look for a clear explanation of the insurer’s reason for denying the claim.
It’s vital to understand the reason or reasons for the denial. Depending on the circumstances, there may be little you can do to change the insurer’s mind — or you might have a strong case on appeal.
These are some of the most common reasons your life insurance company can deny your claim.
The Policy Lapsed Due to Nonpayment
Nonpayment is one of the most straightforward reasons a life insurance company can deny an otherwise valid claim. If the policyholder stopped paying on the policy and didn’t reinstate it during the grace period — which typically lasts 30 to 45 days from the last payment due date — then the insurance company is within its rights to cancel the policy.
Unfortunately, you won’t know that this happened unless you have access to the policyholder’s online account or some other evidence of cancellation, such as an official letter from the insurer. But the insurer’s claim denial letter should clearly state that the policy lapsed.
The Policy’s Term Ended
Outliving a life insurance term is another straightforward reason for a denied life insurance claim — and one likely to leave you with no recourse. If your loved one had a 20-year term life insurance policy and lived for 25 years after it went into effect, it’ll have long since expired at their death.
Improper Death Documentation
Every U.S. person’s death should have a corresponding death certificate. Under normal circumstances, state records offices produce death certificates soon after the hospital, medical examiner’s office, or other authorized entity declares the death.
Less often, it takes longer to generate a death certificate. For example, if the policyholder died overseas, reporting and recording the death is more complicated. The same is true for people who go missing. Without identifiable remains, it’s not so simple to declare a death.
In any event, the life insurance company needs a valid death certificate to approve a claim. If you simply didn’t submit one the first time, resubmitting one with your appeal should solve the problem as long as there are no other issues. If there’s a question about the death certificate’s authenticity or it’s not possible to get one, you may need to submit other documentation, such as a medical examiner’s report.
The Policyholder Misrepresented Something on the Life Insurance Application
If the life insurance company decides the policyholder lied on their application, they could refuse to pay the death benefit. They might still return any premiums paid on the policy, but that’s likely to be a small fraction of what you thought you were entitled to.
The insurance carrier is more likely to scrutinize the policyholder’s application during the contestability period, which runs for two years from the date the policy’s effective date.
During the contestability period, the insurer has the right to investigate the policyholder’s application and circumstances of death even if it has no reason to suspect funny business. These investigations often turn up evidence of misrepresentations or outright fraud, resulting in denied claims. Even in the best-case scenario, they delay payouts by weeks or months.
Omissions or lies that can jeopardize a life insurance payout include:
- Failing to disclose a medical condition correlated with premature death
- Failing to disclose an unhealthy habit, such as smoking
- Failing to disclose a dangerous occupation or hobby, such as working as a wildland firefighter or hang-gliding
- Failing to disclose past convictions for high-risk criminal activity, such as reckless driving or driving under the influence
These omissions are known as “material misrepresentations.” They can result in a denied claim even if they didn’t play into the policyholder’s cause of death because the insurer might have denied the application in the first place if it had the policyholder’s full risk profile.
The Policy Excluded the Cause of Death
Some life insurance policies exclude specific causes of death, such as injuries sustained in active combat, while participating in extreme sports, or while engaged in illegal activity. If the policyholder died for any reason that’s specifically ruled out in the policy, the insurer is within its rights to deny the claim.
Most life insurance policies also have a “suicide clause” that allows the insurer to deny claims on death by suicide during the first two years of a policy. If your loved one died by suicide 18 months after their policy went into effect, there’s a good chance the insurer will deny the claim.
2. Gather Documentation
If the policy lapsed due to nonpayment months or years before the policyholder died or the policy term ended long ago, your options are limited. Because the policy is no longer valid, the insurance company isn’t obligated to pay the death benefit.
If the policy had a return-of-premium rider, you might be entitled to receive the premiums paid by the policyholder. But that’s all you can expect.
If the policy was still in effect when the policyholder died, you might have grounds to appeal. You need to gather evidence to prove your case, though.
That evidence can include but isn’t limited to:
- Any medical records relevant to the policyholder’s illness, death, or both
- An official autopsy report
- An official law enforcement report if the police investigated the death
- As much payment history for the policy as possible, whether payment receipts or bank records
- A certified copy of the death certificate
Depending on the type of policy your loved one had, you may have a fairly limited window to appeal. For example, you may have as little as 60 days from the date of the rejection to appeal a group life insurance policy denial.
3. Appeal the Rejection
Next, prepare and submit your appeal.
You can do so yourself at no out-of-pocket cost. Contact the life insurance company’s claims department and tell them you’d like to appeal the denial. They’ll tell you how to do that, typically by calling a particular phone number or using the company’s online claims portal.
When you appeal, submit all the supporting documentation you’ve collected, even if you submitted similar or identical documentation already. You can’t be sure the insurance company will consolidate your claims, and if they don’t, your second claim could end up being incomplete. That could lead to a second rejection.
4. Bring in a Third Party if Needed
When you submit your appeal, the insurance company will review the new information and determine whether it denied your first claim in error. If that’s the case, you’ll soon get some welcome news — that the claim has been approved and the death benefit is on its way to your bank account.
But what if the insurance company doubles down on its denial? Or you decide you need more support before filing your appeal in the first place?
You have two options: file a complaint with or request for assistance from your state’s insurance department or hire a private attorney who specializes in fighting life insurance denials.
Contact Your State’s Insurance Department
If you believe the life insurance company denied your death claim in bad faith, get your state’s insurance department involved. Also known as an insurance commission, this agency’s job is to protect the financial interests of consumers and businesses who enter into insurance contracts.
You should be able to file your complaint online. At some point, a case manager will follow up with you to get more information and discuss next steps.
Just don’t expect a quick resolution. Your state’s insurance department handles lots of consumer complaints and is almost certainly understaffed, so it could take months or years to resolve your complaint. If your complaint is used as the basis for or is added to a lawsuit against the insurance company, a settlement is likely years off.
Hire a Life Insurance Lawyer
Instead of or in addition to contacting your state’s insurance commission, you can hire an insurance attorney who specializes in contesting denied life insurance claims. They’ll help you prepare and submit your appeal, communicate directly with the insurer for you, and negotiate a resolution.
Again, there’s no guarantee of success, but involving a lawyer does strengthen your case. Of course, you’ll have to pay for their help — most work on contingency, meaning they’ll get anywhere from 33% to 40% of your eventual award.
On the “bright” side, they don’t get paid if they can’t get the denial reversed.
Many working-age adults need life insurance. If you and your spouse or partner have a policy, it’s probably because you’d depend on the death benefit to make ends meet if one of you died early.
A denied life insurance claim rips away that assurance, adding to the trauma of what’s already sure to be a dark period in your life. The good news is that it’s possible to appeal a denied life insurance claim — and though the process offers no guarantees, such appeals are often successful.
Should you ever need to file a life insurance claim, let’s hope you’re among the vast majority of beneficiaries who does so with no issues. But if not, it’s good to know you have options.