Life insurance policies are legal contracts, which the insurer has a duty to honor and uphold in the interests of the insured. Unfortunately, because insurance companies exist to make a profit, they often look for ways to deny valid life insurance claims and prevent grieving family members from receiving the money to which they are lawfully entitled.
If you have been denied a life insurance payout by an insurance company, it is important to contact a qualified attorney before proceeding in matters with the insurance company. The sooner you consult with an attorney, the more likely your interests will be protected and you can seek the insurance money owed to you.
Don’t accept any checks from an insurance company denying your claim, but offering to return your premium payments. Accepting this check may prevent you from pursuing the full amount of insurance money you deserve. To protect your legal interests and get the help you need, please contact our qualified attorneys.
What is Life Insurance?
Life insurance is a contract between the insured (the policy owner) and the insurance company. Under this agreement, the insurer agrees to pay a specified amount of money to named beneficiaries if and when the insured party dies or, in some cases, suffers a terminal or critical illness. In exchange, the insured agrees to pay a premium, either in regular increments or as a lump sum payment.
A life insurance policy is intended to provide peace of mind and security for you and your loved ones. Its purpose is to offer financial assistance to survivors upon the death or serious illness of the policyholder.
Types of Life Insurance:
There are two main types of life insurance policies available in the United States:
- Protection policy: These life insurance policies provide specific benefits when tragic events occur, such as the death of the policyholder. Under these policies, known as term policies, the insurance company usually provides a lump sum payment to the named beneficiaries following the event.
Term life insurance policies, often the easiest and least expensive policies, are intended to provide a family or other survivors with money they can use to replace a decedent’s salary and cover death-related expenses.
- Investment policy: Other types of life insurance provide both the death benefits of a protection policy and a cash value account. These are more expensive policies because they also provide a savings account
The following chart details the types of investment policies and what they do and do not cover.
|Types of Life Insurance||Definition||What it covers||What it doesn’t cover|
|Whole life||Provides beneficiary protection while building a cash account||– pays death benefits and offers low-risk cash value account and tax deferred cash accumulation.- gives fixed premium that cannot increase so long as premiums are paid as stipulated- allows insurance company right to manage the cash account- allows you to receive dividends from the policy, which can be applied to premium payment
– provides you the right to withdrawal from policy during your lifetime.
|– account flexibility to invest in other accounts such as bonds, stocks, and money market.- flexibility to move the money around between accounts- no face amount or premium flexibility|
|Universal life||Provides beneficiary protection and a cash account; is more flexible than whole or variable policies||– pays death benefits and offers low-risk cash value account and tax deferred cash accumulation.- allows the accrual of market rate interest on cash value account- allows insured to borrow or withdraw from policy during lifetime- offers face amount and premium flexibility||– account flexibility to invest in separate accounts, such as bonds, stocks, and money market funds.- flexibility to move the money around between accounts|
|Variable life||Provides beneficiary protection and account flexibility for the more risk-oriented policyholder||– pays death benefits and offers low-risk cash value account and tax deferred cash accumulation.- allows death benefit to vary based on the cash value accounts fund returns- allows policyholder to borrow from the policy during lifetime||– offers no guarantee of cash value amount during lifetime- no face amount or premium flexibility|
|Universal Variable life||Provides beneficiary protection and most control over cash value account policy||– pays death benefits and offers low-risk cash value account and tax deferred cash accumulation.- allows policyholder to invest in other accounts, i.e. bonds, stocks, and money market- offers premium flexibility- can make withdraws or borrow from policy during lifetime
– if you terminate the contract early, you will receive less cash value than total return on a whole contract
|– requires policyholder commitment to manage accounts. The policy’s success determined by personal investment- small premiums are not feasible because premium must cover insurance and cash accounts
Keep in mind that life insurance policies are legal contracts. The insurance company has a fiduciary duty towards the insured to act in their best interests in honoring and carrying out the terms of the insurance policy. However, in action, life insurance companies often look for ways to deny payment of valid claims.
What to Do When an Insurer Denies Payment
Insurers often look for ways to deny valid claims on life insurance policies to avoid paying out money to policyholders and their beneficiaries. In recognizing this unfortunate fact, many states have passed laws that prohibit a life insurance company from denying the payment of death benefits in cases where the decedent died more than two years after the policy was issued. In cases where the policy was issued less than two years before the date of death, the laws are less stringent.
As a result, insurance companies will often investigate a valid claim looking for reasons to deny payment to the bereaved.
What Grounds Do Insurance Companies Use to Deny Claims?
One of the most common reasons insurance companies give to deny claims is “material misrepresentation.” This means that the insurance company will search the original insurance policy application looking for places where the policyholder may have intentionally or accidentally concealed a fact. These facts can include anything from the disclosure of health conditions to the names of doctors seen in the past 10 years.
While insurance companies use this questionable tactic to deny claims, it’s important to know that not all “misrepresentations” give the insurer a valid right to deny the claim. The misrepresented fact has to be considered material, meaning that it must involve discrepancies in important facts, such as a fact that might have led the insurer to refuse to accept a policy.
In many cases, once a claim is made on a life insurance policy, the insurer will look for ways to deny the claim. If they find even the slightest mistake on an insurance policy application, they may try to deny coverage and send the bereaved a check for premiums already paid. This is often done to appease the claimant and avoid paying a claimant the full amount to which they are entitled.
Cashing a check sent by an insurer who has denied a claim will often prevent the claimant from pursuing the policy money they are rightfully owed.
Before cashing any check, it is important to contact an attorney who can investigate your case and determine your best course of action. You may be able to seek the policy payments you are owed through litigation.
If you need help recovering life insurance money, we are here for you. Please contact the qualified and experienced attorneys at Oshman & Mirisola for a free, confidential, no-obligation consultation during which you can learn how recover the insurance money you deserve.