Why Claims Don’t Get Paid Out

The fear of claims not paying out is a fear that leads many people to be wary about insurance and, in some cases, not to take insurance at all. In my opinion, there is no higher gamble than to gamble with one's life. When one's life is not insured, it is a gamble that will almost always end in a loss for more than one person. While it is unfortunate when we hear that a claim doesn't payout from one of our clients, it is imperative to note the reasons why claims will out payout. By analyzing the common misconceptions about the life insurance industry, it will allow you to understand why some claims cannot be paid out.

#1 - You Were Dishonest On Your Application: 
We like to believe that every client we speak to is telling us the truth, however; sometimes, this is not the case. In cases of fraudulent misrepresentation, such as in the cases of smoking status or past health issues, the insurer can deny your death claim. Alternatively, if they discover that you've been fraudulent while you are alive, they will void your policy and return any premiums paid. The only way to avoid this is to be honest with our life insurance agents and to fully disclose anything you feel may hinder you from obtaining insurance. If you have past or current health conditions that prevent you from qualifying for standard insurance, we do offer No Medical Life, Disability, and Critical Illness to ensure you don't have to go without.

#2 - The Insured Commits Suicide Within The First Two Years:
All life insurance policies have a two-year exclusion period for deaths that occur as a result of suicide. This means that if you were to commit suicide within the first two years after the policy is issued or reinstated, the death benefit would not be paid.

#3 - Two Year Incontestability Period: 
For the first two years of a life insurance contract, the insurance company can re-evaluate its underwriting of the policy. If they discover that a material mistake (birthdate/smoking status/health information) was made in the application for coverage, the insurance company has the option of adjusting the premiums, adding exclusions, or voiding the policy. Thus, the policy is said to be contestable during the first two years. Reinstated policies are also contestable for the first two years following reinstatement. Once this contestability period has expired, the policy is said to be incontestable. This means that the insurance company cannot cancel the policy for any reason other than missed premiums, or fraudulent misrepresentation.

#4 - You Didn't Pay Your Premium:
Missed premiums lead a policy to have a 30-day grace period where the premium must be paid for the policy to stay in force. If you fail to pay this premium after 30 days, the policy will lapse and need to be reinstated. Reinstatement may require proof of insurability, so it's best to ensure that your premiums are paid on time to avoid this hassle down the road. It's also noteworthy to mention that the incontestability period and suicide exclusion period will start again after reinstatement.
 
Once you see that the reasons that a death claim can be declined are all valid and above board, you can put your fears and reservations about insurance to rest. Unlike a traditional mortgage insurance policy where they do most of their underwriting at claim time, our licensed insurance agents and up-front underwriting are your best bet.
 
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