Life Insurance 101
Written by Christopher J. Brochu
When your loved one passes away, the last thing you want to think about is their life insurance policy. The life insurance claim process can be sad, frustrating, and intimidating. When a family member dies, the financial stability of the family is one of the biggest question marks there is. Sometimes, a life insurance policy is the only thing that affords a family the ability to stay in their home. Therefore, it’s important to know who you are up against. The insurance company recognizes your vulnerability and handles scores of claims over the course of a year. Insurance representatives are trained to use the law and facts to their advantage. Below, we’ll discuss in more detail a few of the insurance industries’ most common tactics. Knowing the many ways that an insurance company can deny a life insurance application is important. Once you understand the players and the rules, it’s easier to understand their game.
Typically, insurance companies use three approaches when evaluating life insurance claims.
- Paid Claim: If a life insurance company has neither a legal remedy to investigate a claim nor an affirmative defense to challenge a claim, the life insurance company is required to pay the claim.
- Denied Claim: If a life insurance company has the ability, it will deny your claim. Once your claim has been denied, you may file an appeal or file a lawsuit against the insurer.
- Delayed Claim: Life insurance law is governed by the state where the contract was executed or the jurisdiction named on the policy. In Florida, insurance companies are required to act in good faith and fair dealing. Florida law also affords insurance companies the ability to deny and investigate claims based on a limited set of standards. In Florida, if an insured dies within two years of the inception date of the insured’s life insurance policy, Florida law allows for the insurance company to investigate the insured’s claim, policy, and questionnaire. If the insured died within two years of the inception of the insured’s policy, the insurance company will conduct an investigation and look through the past 10 years of the insured’s medical history, at the coroner report, and death certificate. The life insurance company will compare the insured’s application and life insurance questionnaire to the insured’s medical history. Given that most individuals die of some cause, the insurance company will attempt to find a silver bullet to use as evidence to deny your claim. Additionally, any discrepancy found by the insurance company in the insured’s medical history vs. the insured’s application will be used against the claim. The life insurance company may even require the beneficiary to answer a series of questions related to the discrepancies. The life insurance company will try to intimidate the beneficiary by claiming that the insured lied or misrepresented information. Denials range from being based on a misrepresentation on the application to the suicide of the policyholder. Denials have limits and conditions that must also be met, for example, a misrepresentation must be done with the intent to deceive and suicide must be within the two-year contestability period. These conditions also have exceptions therefore carefully reading the policy is always important.
Here are 10 common reasons that an insurance company may deny your life insurance claim:
1) The insured’s death occurred within the contestability period.
As discussed in the Delayed Claim section above, Florida law provides insurance companies with the ability to investigate any claim where the insured died within two years of the policy inception date.
2) The policyholder was obese and had related health conditions.
The insurance company hates when it has issued a policy and then an insured dies within a short amount of time following the policy inception. The insurer will do anything in its power to show that the insured improperly completed or misrepresented information.
3) If the policyholder has Aids or HIV.
These types of medical diseases are specific to each policy. An attorney can help explain the language of the policy as it relates to different medical conditions.
4) If there is blood or proteins in the urine.
Again, medical exclusions and examination are specific to each policy. An attorney can help explain the language of the policy as it relates to different medical conditions.
5) The policyholder’s income level is too low.
The insurance company will investigate a policyholder and its financial position at the time of the policy inception date.
6) The policyholder has a history of drug use including tobacco use.
Let’s face it, a population of Americans has tried an illegal substance (marijuana, cocaine, etc.) and an even larger population has tried a cigarette, cigar, dip, or snus. Often, the life insurance policy language is vague and the broker explaining the application is not an attorney and does not understand the question either. Moreover, insureds will answer the drug and tobacco questions to the best of their ability. The insurance company will then investigate the insured’s background and discover a discrepancy. Misrepresentation claims come down to policy language, records, and evidence. An attorney can finds ways to answer the insurer’s questions without disclosing unnecessary information.
7) The policyholder participates in dangerous activities on a regular basis or works in a hazardous environment.
The insurer will find any reason to deny a claim. Sadly, that means investigating the insured’s leisure activities and employment. You may want to speak with a life insurance attorney before you ever disclose information about your loved one. Anything you give or say to the insurance company will be used against you.
8) The policyholder has a history of illegal activities.
Life insurance companies have access to large databases and can hire private investigators to conduct background checks. The life insurance company will use the background information to find application discrepancies. Criminal records and past drug crimes and criminal history may be a basis for the insurance company to look more closely at the policy claim.
9) The policyholder moves outside of the United States.
American deaths that occur outside the U.S. provide a unique set of challenges that do not occur with domestic deaths. Deaths on foreign soil pose complications because some doctors around the world are not as qualified as American doctors and may not properly examine an insured. Other complications arise when an insured dies overseas and nobody is found and/or the insured’s death is unknown. Just to name a couple of scenarios.
10) The policyholder suffers from alcoholism.
History of abuse of alcohol can lead to an investigation, and then, denial of a claim. If the insurance company has asked you about your loved one’s dependence on alcohol, you may want to speak with a life insurance company. Anything you disclose to the life insurance company will be used against you.
Brochu Law, PLLC represents Life Insurance Claims on a contingency fee basis. There is no fee unless you win. We advance all costs on behalf of military families and consumers.
Brochu Law, PLLC represents military families and consumers nationwide*
*Disclaimer –Christopher J. Brochu, Esq. is licensed to practice law in the State of Florida. Brochu Law, PLLC works with co-counsel in accordance with state and federal law.
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