Life insurance can be an effective way to protect our family or loved ones in the event of your death, but there can also be associated challenges. In some cases, insurance companies delay or deny claims, which defeats the purpose of purchasing the life insurance policy. While some of the basis for denial may be legitimate, others may be legally flawed, denying beneficiaries of their benefits.
The life insurance dispute lawyers at Calabrese Law Associates can help you through your legal challenges. We represent clients in the Greater Boston Area and throughout Massachusetts with an excellent track record of delivering desired results. This guide will help you understand your rights under the law.
Common Reasons for Life Insurance Claim Denials
Insurance companies may deny your claims for various reasons, including the following:
1. Exclusions
Insurance coverage has exclusions — situations that are not covered under the policy. In other words, specific causes of death may be excluded from coverage. Thus, if the policyholder passes away due to an excluded cause, the insurance provider may deny the beneficiary’s claim. Exclusions are typically provided in the life insurance contract, and the insured is expected to read and understand the terms before signing.
Life insurance companies add exclusions to reduce their liability. Unfortunately, most people overlook such details. Examples of exclusions you may find in a life insurance policy include deaths caused by suicide and homicide. Some kinds of accident-causing deaths, such as substance abuse and deaths resulting from risky activities like rock climbing, may also be excluded.
2. Unpaid Premiums
Policyholders have various obligations under insurance contracts. One vital example is the payment of insurance premiums. Insurance premiums are the amount the policyholder pays monthly, annually, or otherwise to keep the policy active. The amount and payment structure are stipulated in the agreement and can be negotiated when the policyholder purchases the coverage. Once signed, the insured must pay accordingly to enjoy the benefits provided in the contract.
Life insurance providers may deny a claim based on the fact that the policy has lapsed. A policy can lapse for several reasons, such as if the policyholder fails to pay the premium or if the term covered in the policy expires.
Many people miss the fact that most state laws, including Massachusetts, offer an extra layer of protection, often called the grace period. This allows the policyholder to make late payments within a specified duration to bring the account current before the insurer cancels the policy for premium non-payment. If the insurance company cancels the policy before the grace period passes, the policy has not lapsed, and the policyholder may rely on that to challenge the denial of coverage.
In other instances, policies lapse, but the insurance company and policyholder arrange for reinstatement. If the reinstatement is finalized and the policyholder diligently pays the necessary premiums, the insurer cannot deny the beneficiary’s claim. However, the specific facts of the circumstance and terms of the policy are crucial in determining a party’s rights and responsibilities, so it’s essential to consult a life insurance lawyer for personalized advice.
3. Contestable Circumstances
Life insurance policies include contestability clauses to safeguard the insurance company against unwarranted claims. Fundamentally, the contestability period is a window — typically a two-year period from the policy’s effective date — that allows the insurance company to investigate and potentially contest false or inaccurate information the policyholder provides. Unfortunately, some insurance companies leverage that to deny otherwise valid claims.
If the policyholder dies within the constestability period, the insurance provider can investigate to find discrepancies. However, the fact that the insurance provider has found something does not automatically bar you from getting a payout under the policy. The burden lies on the insurer to substantiate their claim, which you have the right to challenge. A life insurance attorney can examine the situation to determine whether you have valid reasons for legal action. The outcome may depend on the circumstances of each case, but working with a professional is recommended.
4. Material Misrepresentation
The policyholder must provide accurate information and disclose relevant facts. Thus, the insurance company may deny a beneficiary’s claim if they make false statements or conceal vital details. The precondition for denial is that the misrepresented fact or omission must be material and capable of causing a significant difference in the amount of risk sustained by the insured, including age, health condition, income level and occupation.
Some life insurance providers cite fraud or misrepresentation as a reason for denying claims, but a careful review of the situation could reveal that their basis is flawed. For example, it may turn out that the alleged misrepresented fact has nothing to do with the assessed risks or cause of death and, as such, has no implication on the claims. These situations can be technical, but a life insurance lawyer can help you determine the validity of your claim. This can save you time and money.
What Are Your Legal Rights After a Claim Denial?
You may contest a claim denial if there is valid legal basis. The challenge is that life insurance law is complicated, considering that your rights may vary depending on several factors. A policyholder’s protection may differ from state to state or between state and federal laws. Similarly, the type of life insurance policy can determine your rights and liability. The terms and conditions under specific life insurance coverage may also differ.
For example, insurance companies are obligated to act in good faith. This means they must be honest and fair in all their dealings. In many states, if the insurance provider acts in bad faith, that can be grounds for challenging a claim denial. The courts may even award punitive damages as punishment against the insurance provider.
However, if the breach relates to an employer-provided insurance plan to which the federal Employee Retirement Income Security Act (ERISA) applies, the insurance provider cannot be sued for bad faith. The policyholder’s remedy is limited to recovery of the amount due under the contract. These nuances make life insurance law complex, so it’s best to consult a life insurance lawyer to assess your situation on its merits.
How Do You Challenge a Claim Denial?
Here are some helpful tips for challenging a life insurance claims denial:
- Contact your insurance provider: Call the insurance company immediately to ascertain the reason for denial, especially if none is provided.
- Request a written explanation: Insist on getting an explanation in writing. Some insurers are hesitant because such documents can serve as evidence in court, but it’s their duty to make them available.
- Get a lawyer: The chances are the insurer has a team of litigators behind them, so it’s best to hire an experienced attorney. The lawyer can examine your case and develop a strategy, such as negotiating a settlement or initiating legal action.
- Challenge the claim: You may attempt to resolve the matter out of court, but if that fails, you may sue if you believe you have a valid claim. Some contracts require the parties to use alternative dispute resolution (ADR) mechanisms before going to court.
Reasons for Hiring a Life Insurance Claim Lawyer
Here are four reasons to hire a life insurance attorney:
- Knowledge and experience: The attorneys at Calabrese Law Associates have rich private investment backgrounds and experience.
- Personalized legal strategies: Every situation is different, so it’s essential to assess your case based on its merits. Our lawyers provide solutions tailored to your case.
- Transparent communication and dedicated support: Our professionals use a supportive, honest, yet practical approach in handling legal matters. We are committed to our clients and dedicate resources to help them succeed.
- Aggressive representation: Whether negotiating a settlement or representing clients in court, the lawyers at Calabrese Law Associates prioritize clients’ interests. We represent clients aggressively and strive to deliver the best results possible.
Contact a Trusted Life Insurance Dispute Lawyer
Hiring a lawyer to review a life insurance policy is ideal. Lawyers are trained to analyze situations and determine the rights and liabilities of parties. If your life insurance claim has been denied, consult Calabrese Law Associates immediately for tailored legal support. Waiting too long can affect your case. Our life insurance attorneys will guide you through the process. Contact us today to learn more!
This publication and its contents are not to be construed as legal advice nor a recommendation to you as to how to proceed. Please consult with a local licensed attorney directly before taking any action that could have legal consequences. This publication and its content do not create an attorney-client relationship and are being provided for general informational purposes only.
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