People hold life insurance to have peace of mind if a crisis happens and to protect their loved ones when the time comes. However, not all life insurance claims are paid; some can be delayed or even worse, denied.
Having an insurance claim denied is definitely something no one wants to go through. Here is a look of the most common reasons why denials could happen and what you could do to avoid being part one of these unlucky few.
1. The policy lapsed due to non-payment
A life insurance policy is activated as long as premiums are paid. When premiums are not paid when due, a policy may lapse. It is important to remember that only one missed payment at the wrong time can result in years of your paid premiums going out the window.
The best way to prevent this is by setting up a direct debit from an account that you know will always have money. Furthermore, you can choose your premium date to be the day after you get paid. Lastly, always let your insurer know of any changes to your personal details.
2. The cause of death wasn’t covered by the policy.
Life insurance contracts may contain exclusions which include the cause of death. Common exclusions (following underwriting assessment) may include deaths caused by mental illness, drugs or alcohol or any pre-existing conditions or death in a foreign country where the Australian government has issued a travel warning.
You need to be aware of exclusions so that you can manage, set up additional insurance or change insurance providers altogether. You must read your product disclosure statement (PDS) and also compare terms with other policies as not all of them are alike. Some insurers may provide more coverage than others.
3. The cause of death was suicide and the policy had been in force for less than one year.
The insurance company may not pay the beneficiary of your policy in the event of suicide depending on the circumstances. As a rule of thumb, if a life insurance policy is purchased within one year of committing suicide, the death benefit will rarely be paid. Furthermore, if during underwriting the insured disclosed any mental health conditions, it’s highly likely that the claim for suicide will be denied.
It is wise to find out in advance about any related exclusions in your policy. But more importantly, if you or someone you know is suffering from a mental health condition or just having a hard time, getting immediate help for yourself and them is essential so that you do not have to worry about your life insurance policy and if it will pay out in the event of a suicide.
4. The insured did not disclose a condition that was later related to the death.
As a policyholder, you have a responsibility to provide all information requested by the insurer during the underwriting process. If you do not disclose all your conditions –e.g. high blood pressure-, the possibility a claim will not be paid due to material misrepresentations on the application.
We recommend that you provide correct information and ask your insurer anything you are not sure about. The insurer must tell you the truth and if they do not, then you could repeal any denied claim on account of the provider’s non-disclosure.
Having to deal with a denied life insurance claim in times of crisis is an added devastation. Knowing about the reasons a claim is denied is important so you and your loved ones do not end up with surprises when the time comes. Contact us to know where you stand and what your options are.
We pride ourselves on our pre-assessment risk protection service to give you the confidence and clarity about the policy that is right for you.
Sources
[1] Life Insurance Comparison (2018.), Top 5 Reasons Life Insurance Claims are Denied, https://lifeinsurancecomparison.com.au/top-5-reasons-life-insurance-claims-are-denied/
[2] Life Insurance Lawyer (n.d.), Reasons for Life Insurance Claim Denials or Delays, http://life-insurance-lawyer.com/reasons-life-insurance-companies-use-to-deny-your-claim/
[3] The Balance (2018), What’s Covered in a Life Insurance Policy for Suicide? https://www.thebalance.com/does-a-life-insurance-policy-cover-suicide-2645609
