Life insurance is something that provides peace of mind to policyholders and their beneficiaries in case the worst happens. Unfortunately, when the time comes to file a claim for life insurance benefits, many people are surprised to find that their claims can be denied. In British Columbia, as in other regions, there are several common reasons lead to the denial of life insurance claims. Understanding these reasons can help policyholders ensure that their claims are processed smoothly, and recognize when there has been a wrongful denial of life insurance benefits that they should challenge with the assistance of an experienced life insurance denial lawyer.

Material Misrepresentation or Non-Disclosure

One of the most common reasons for life insurance claims to be denied is misrepresentation or non-disclosure of material information during the application process. Applicants are required to provide accurate and complete information about their health history, lifestyle choices, and any other relevant factors. Often the disclosure of relevant information will form part of the underwriting process, or in some cases trigger an underwriting process that would not occur unless certain medical information is present. If an insurer discovers that a policyholder failed to disclose a pre-existing medical condition or exaggerated or otherwise misrepresented their health status, they may deny a claim based on the argument that the policy was issued under false pretenses and without the full information they needed to fairly gauge the policy risks.

In British Columbia, insurers have a two-year contestability period during which they can investigate the validity of a claim, and the accuracy of the information provided. If material misrepresentations are found within this period, insurers may deny the claim on that basis alone.

Policy Exclusions

All insurance policies contain specific exclusions that outline circumstances under which claims will not be paid. Common exclusions with respect to life insurance policies include deaths resulting from acts of war, suicide within a certain timeframe after the policy is issued (often two years) and engaging in high-risk activities (such as skydiving or scuba diving) without proper coverage.

It is crucial for policyholders to carefully review their policy documents to understand what is and isn’t covered. Failure to recognize these exclusions can lead to unexpected claim denials when beneficiaries attempt to file claims after the policyholder’s death.

Failure to Pay Premiums

Life insurance policies require regular premium payments to remain in force. If a policyholder fails to make premium payments on time, the policy may lapse. In British Columbia, insurers usually offer a grace period for late payments; however, if the policyholder does not pay within this time frame, the policy can be terminated by the insurer for lack of payment of premiums.

When beneficiaries file a claim on a lapsed policy, the insurer will deny the claim, as the coverage was no longer active at the time of the policyholder’s death. It is essential for policyholders to keep track of their payment schedules and maintain communication with their insurers if any issues arise. Insurers will often be understanding and accommodating to issues so long as you keep them advised and informed ahead of time. Always ensure that any agreements with an insurance company are made and/or confirmed in writing.

Insufficient or Incorrect Claim Submission

The process of submitting a life insurance claim can be intricate, requiring various documents, such as death certificates, the original policy, and medical records. If any of these documents are missing, incorrectly filled out, or not submitted in a timely manner, the insurer may deny the claim based on insufficient or incorrect documentation.

Beneficiaries should carefully follow the insurer’s instructions when filing a claim and ensure that all required documentation is completed accurately and in the form required. It is not the insurer’s responsibility to ensure the application is done correctly and if you fail to do it correctly that can lead to a denial of an otherwise legitimate claim.  Some insurers provide a checklist to help guide beneficiaries through the process, which can be invaluable in avoiding claim denials due to submission errors. Understanding how to deal with your insurance company can be extremely important in making sure you do not have your claim denied.

Fraud or Recklessness

As noted above, for the first two years of a life insurance policy, it can be voided for material misrepresentation on behalf of the insured. However, after two years, misrepresentation in and of itself is not enough to void a life insurance policy. In order to void a life insurance policy after it has been in effect for two years, an insurer must prove that any misrepresentation made on behalf of the insured was made fraudulently, or recklessly with respect to whether or not it was accurate.

While this puts a much higher threshold an insurer must pass in order to deny a claim for life insurance benefits when compared to simply having to show that a material misrepresentation was made, defending against allegations of fraud, and particularly against allegations of recklessness can be more difficult than you might imagine. The legal test for what is or is not reckless is complex and applying it to fact patterns where you are almost always dealing with representations made by someone who is no longer with us can make such claims difficult.

Experienced Life Insurance Denial Lawyers

Denied life insurance claims can be devastating to those already suffering from the loss of a loved one. The experienced life insurance denial lawyers at Taylor & Blair LLP can review your claim and make sure that the insurance company pays out the life insurance benefits you’re fairly entitled to. Contact the lawyers at Taylor & Blair LLP today to schedule a free consultation for your denied life insurance claim.