5 Common Reasons Why Insurers Deny Life Insurance Claims
Purchasing a life insurance policy not only provides peace of mind to you and your loved ones but is an essential part of a sound financial plan. For example, if your life insurance claim is denied, it can have a devastating impact on your family’s financial future. Here are five common reasons why insurers deny claims.
1. Missed payments
If you miss your monthly or quarterly payments, your insurer has the right to cancel your policy. There’s typically a grace period of 30 days. However, if you fail to pay your premium during that time, you may need to ask your insurer to reinstate your policy.
Additionally, some insurers allow you to reinstate your policy within a given timeframe, providing you make the missed payments. However, you may be charged a penalty.
2. Incorrect information on the application
Many people think they can get a cheap premium by not mentioning certain things that could make them a high risk to the insurance company. However, if the insurer finds out you intentionally misrepresented yourself, it can deny your claim.
For example, lying about being a smoker, downplaying high risk activities like scuba diving, fibbing about your poor driving record and not disclosing a past drug or alcohol addiction can affect your insurance policy. It pays to be honest.
3. Contestability period
The insurance company may delay paying your beneficiary while it investigates the cause of your death. This is a mandatory process if you die within two or three years of purchasing a life insurance policy. The investigator will ensure you’ve paid your premiums and that everything on your application is accurate. Moreover, the insurer may deny the claim or only offer a partial pay-out during this contestability period.
4. Policy exclusions
Life insurance policies often have a clause that excludes coverage for certain types of behaviours or causes of death. For example, if the policyholder commits suicide, dies participating in a risky activity like skydiving or succumbs to drug or alcohol abuse, the life insurance claim may be denied. Therefore, you must read and understand the exclusions outlined in your policy.
5. Insufficient documentation
Your life insurance beneficiary must supply the insurer with several documents to make a successful claim, like a certified death certificate, a copy of the life insurance policy and a doctor’s statement or coroner’s report. Otherwise, the claim could be denied.
If you die outside of Canada, you may require more documents, some of which may be difficult to obtain.
Life insurance brokers in Nova Scotia
At Eisenhauer Insurance Inc., our brokers can guide you through the life insurance process and help you avoid costly mistakes. We also provide home and car insurance. Contact us today at our offices in Halifax and Dartmouth, NS, for a free, no-obligation consultation.