HOW TO PREVENT LIFE INSURANCE CLAIMS REJECTION
In this article, which is titled; ‘How to prevent life insurance claims rejection’, these sub-topics are discussed:
A. 4 most common reasons why insurers deny life insurance claims
B. Understanding the contestability period
C. Why the contestability period exist?
Contestability allows your provider to review your application for intentional and unintentional errors after a death claim. The contestability period (which is explained fully in the later end of this post) only lasts for two years. If you get a new policy or reinstate your policy after a lapse, contestability restarts.
After the contestability period ends, life insurance coverage is usually considered incontestable. This means your beneficiary will usually receive the coverage amount as long as the coverage was in force. Some policies have exclusions, or situations in which a benefit may not be paid.
A. 4 most common reasons why insurers deny life insurance claims.
When you buy a life insurance policy, there’s a chance your beneficiary’s claim may be denied – and it’s important for you to know how this can happen.
Insurers examine the terms of policies carefully before paying claims, to make sure policyholders have fulfilled their obligations.
If insurer determines that you violated your policy terms, it can refund your premiums to your estate and pay your beneficiaries nothing.
“Don’t give insurers an excuse to reject your claim,”
Here are four things that can lead to the denial of a life insurance claim.
1. The death happened during the contestability period.
Policies have contestability periods that typically remain in effect for two years after they’re purchased.
If you die within the contestability period, which typically lasts two years from date you purchased your policy, your insurer can investigate whether you wrote correct information on your life insurance application.
If you lied about something on your application, the carrier may refuse to pay the death benefit, even if the cause of death had nothing to do with the misrepresentation.
For example, if you lied about a medical condition, but died in a car accident that wasn’t related to that condition, your insurer could still deny the death benefit.
If you survive the contestability period, such misrepresentations normally don’t prevent benefits from being paid.
However, if the insurer believes a policy was purchased in a plot to murder the insured and collect the benefit, the claim will be denied, even when the contestability period has passed.
✔️ Get Insured as early as you can to surpass the two year contestability period. Our memory failed us sometimes, there is a possibility that we missed to disclose important information unintentionally.
2. The type of death wasn’t covered in the policy.
Life insurers once used a variety of exclusions that focused on type of death.
For example, if the insured died while engaging in a dangerous hobby, such as skydiving or scuba diving, insurers typically refused to pay the claim. Dying in a war also was a common exclusion.
The only life insurance policy exclusion that’s widely used today is death by suicide. However, even the suicide exclusion typically will be waived if the death occurred after the contestability period.
✔️Always check the exclusions. Not all deaths are covered even after the contestability period.
3. You failed to disclose relevant personal information.
The most common reason insurers give for denying life benefits is if you fail to disclose information needed to accurately measure the risk of a policy payout.
If you applied for coverage and you didn’t honestly answer the questions, that’s grounds for them to deny your claim.
Not all inaccurate information is grounds for denial, such as writing an incorrect address or driver’s license number. These would be considered errors, not intentional misrepresentations.
However, if you failed to disclose convictions for driving while intoxicated, that could be grounds for denial, but only if it’s discovered during the contestability period. After the contestability period ends, these convictions typically would not be used to deny the claim.
There are some misrepresentations of facts that are grounds for denying or reducing a death benefit, even if they’re discovered after the contestability period has ended.
For example, if the insurer learned that you convinced a physician to provide false information to hide a medical condition, this would be grounds for denying a death benefit claim.
Or if you lied about your smoking habits, it could be a ground for denying a death benefit, even after the contestability period, it could be a ground for reducing a death benefit.
✔️ANSWER THE APPLICATION FORM TRUTHFULLY.
(If you failed to disclosed relevant personal information, intentional or unintentional, it could still be a ground for denying a death claim, So get an Insurance Policy as early as possible to surpass the two year contestability period.)
4. You failed to keep up with policy premiums.
Insurers strictly hold policyholders to the terms of policies. You won’t be able to collect on a life insurance policy if the premium was allowed to lapse.
Elderly policyholders often develop memory problems that cause them to miss payments, which results in policy cancellations. Policies typically have a grace period of at least 30 days, during which you can pay the premium due and not be charged interest.
One way to avoid having your policy lapse is to have your premium payments deducted automatically from your checking or savings account.
Policies with a cash value, such as whole life insurance, often have a provision that allows the carrier to borrow from the policy value to pay overdue premiums. This protects the policy only as long as sufficient cash value remains.
✔️ALWAYS PAY YOUR PREMIUM IN TIME
DON’T GIVE INSURERS AN EXCUSE TO REJECT YOUR CLAIM.
In continuation of this post on HOW TO PREVENT LIFE INSURANCE CLAIMS REJECTION, let’s see the meaning of 2 years Contestability Period.
B. Understanding the Contestability Period
A life insurance policy is a worthwhile investment, as it provides the beneficiaries a financial safety net after the policyholder passes away.
However, there may be instances when a beneficiary files for a claim on a life insurance policy, only to be denied by the insurance carrier. There are many reasons for an insurance company to deny a claim, something which usually takes place during the contestability period.
Contestability Period Explained
Simply put, the life insurance contestability is the window during which an insurance company can look into and deny a claim after a policyholder’s demise. This period is, in most states, typically set at 24 months starting from the moment the first policy payment is made. This means that should the policyholder pass away soon after he or she started paying for the premiums, the insurance company has the right to delay payouts to the beneficiary until investigations are complete.
In this period, which lasts for two years your insurance provider will investigate the claim for your policy and can dispute it if they find that you withheld relevant information or misdeclared important matters, like medical conditions, during your application.
Vital information, such as pre-existing medical conditions, affects the price of your premiums as well as the benefits payout your beneficiary will receive. That is why your insurance company must have accurate information from you so they can provide the right policy and premium, from the start.
C. Why The Contestability Period Exists
Sometimes, people fail to provide or they withhold accurate information on their life insurance applications. Omissions or outright providing wrong information can mean better premium prices or policies that a policy applicant would otherwise not qualify for. Some people, though, make honest mistakes when applying for life insurance.
Because these mistakes can cost an insurance company more money in benefits payouts, they need to stringently screen for these errors during the contestability period and ensure that a policyholder provided the correct information, especially before making any payout to the beneficiary.
Insurance companies perform a thorough investigation or a reevaluation during the contestability period. Doing so protects them from with the possibility of paying out more than they would have, had the right information been provided at the onset of the policy application.
The Contestability Period And Your Death Benefit
Keep in mind that it is okay if your beneficiary files for an insurance claim after your passing and your policy is still in the contestability period.
Just because the insurance company is investigating the circumstances of your death and the information you provided on the policy doesn’t mean that they will reject the claim. As long as all the information you supplied during the application was accurate, your beneficiary should not have any problems with the insurance claim.
As long as you supplied factual, accurate information and paid your premiums on time, your beneficiary will receive the full payout when it comes time to claim on your life insurance policy.
SEE ALSO : How Much Term Life Insurance Should I Own
Hope this post (on HOW TO PREVENT LIFE INSURANCE CLAIMS REJECTION) helps?