The main purpose of a life insurance policy is to help provide for the financial needs of family members in the aftermath of the policyholder’s death. It can come as quite a shock, however, when beneficiaries receive a denial of their claim while coping with the loss of their loved one.
Contingencies that void coverage are always potential pitfalls during the claims process, and policyholders and their beneficiaries should also be aware of the unique claim handling process of their chosen life insurance company. Although rare, should this happen, Las Vegas-area residents should find out what legal options they may have as they go through the appeals process.
How contingencies limit coverage
When a life insurance company denies a claim, there are usually one of four reasons for this action:
- A policy delinquency has occurred due to a lapse in premium payments, or if the principal allowed the insurance to expire without informing the beneficiaries.
- A material misrepresentation has occurred in which the policyholder withheld vital information regarding current health conditions, lied about income or immigration status, misinformed or withheld information about another insurance policy, or if the agent provided incorrect information on the application.
- The time of death is outside of the scope of coverage, especially within a contestable time frame within the first two to three years of the effective date.
- There has been an omission of important documents such as the death certificate or incorrect documentation during the claims process.
Taking steps to avoid a life insurance denial
As the contestability period is often the reason for a claim denial, it is essential for the policyholder and the beneficiaries to be aware from the very beginning of the time frame the insurance covers.
After the initial denial letter, beneficiaries should seek clarification from the insurance company and prepare to provide vital documentation such as medical records, an autopsy report, or insurance receipts in the appeal of the claim denial. It is also important to doublecheck the time limit of the appeal. Some beneficiaries may seek help from the Nevada Department of Insurance to understand more about insurance denial claims.
As life insurance policies are densely worded documents, it is essential to understand from the outset what the contingencies of the policy are to understand what the policy will or will not cover. Examining the initial application responses of both the policyholder and their agent will pinpoint incomplete or inaccurate responses that could pose potential issues in the future.
