What to Do if a Loved One Died in an Uninsurable Way

If you’re considering purchasing life insurance, you should realize that in most circumstances, insurers pay out after the insured dies.

However, it is customary to be curious about the small percentage of claims that do not go as smoothly. After all, the whole goal of having life insurance is to have peace of mind knowing that your family would receive a lump sum if you die while your policy is in effect.

Here’s what you need to know about unpaid claims and what you can do to help prevent problems with your coverage.

Does Life Insurance Always Pay Out?

Life insurance does not always pay out, although it does in most cases. Payout rates for whole life insurance, which lasts a lifetime rather than a predetermined period, were as high as 99.9%. However, this is only part of the total industry picture. Different suppliers have different claim statistics, although over 95% is frequent. If you acquire a life insurance quote, you can usually compare the claims rates of each company.

Claims statistics can be beneficial, although there is little difference across insurers. Also, remember that you’re not necessarily comparing apples to apples, as not all providers have the same criteria for rejecting claims. It’s easy to become distracted by claims statistics, and insurers naturally push high payment percentages at every chance. It is critical to assess whether the coverage features are appropriate for you and whether the life insurance premiums you will pay are reasonable.

What Are the Reasons Life Insurance May Not Pay Out?

Insurers usually explain why they cannot pay in their policy terms. So, before you pull out, commit to a specific cover, and read the fine print.

The following are some common reasons why claims are denied.

You weren’t truthful when you applied

Not precisely answering application form questions, providing misleading information, and withholding whatever the insurer requires are all common grounds for insurers refusing to pay out in full or at all.

When applying for life insurance, you will be asked questions about your health and lifestyle. This covers any medical issues, whether you smoke, how much alcohol you consume, and your height and weight. Read the application questions, including the definitions, carefully. For example, if you’ve used tobacco or nicotine replacement products like e-cigarettes in the previous 12 months, even if only rarely, you’re considered a smoker.

It’s critical to be open, honest, and accurate in your responses so that nothing subsequently causes an insurer to question a reimbursement. If you’re unsure about an answer, say so so the insurer can investigate rather than speculate.

Once your insurance is in effect, you should not need to notify your insurer of any changes, such as stopping smoking or experiencing health problems. Your premiums are determined by the circumstances under which you purchased the policy.

The cause of death is excluded from the policy

If your insurance contains exclusions, filing a claim for something that isn’t covered will not result in reimbursement.

So, if your policy exclusions include death from a particular ailment or an accident while participating in a risky activity, no payout would be made if that was the cause of death.

When insurers evaluate your application, they consider your health information, any illnesses you may have, and other criteria such as dangerous work or interest. If any of these factors raise the likelihood of a claim, it may be incorporated into your policy as an exclusion.

In general, insurers will not pay out if a policyholder dies as a result of:

  • Misuse of drugs or alcohol
  • Terrorism or warfare
  • Recklessness or extreme negligence
  • Committing suicide in the first year

Exclusions vary greatly depending on the insurer and the individual, so read the fine print before purchasing a policy.

You’ve missed premium payments

In addition to giving any pertinent information, your half of the bargain is to continue to pay any outstanding premiums. If you fail to pay your premiums on time, such as within 60 days, the insurer may cancel your coverage and refuse to pay out.

If your insurance includes a premium waiver and you cannot pay premiums for some time due to an accident or illness, this should not affect your payment. This is provided you notify your insurance and follow the rules of the benefit.

You die during the waiting period

Some life insurance policies, particularly those for those over 50, have a time limit after the start date, after which an insurer will not pay out if you die. Before your coverage goes into effect, this qualification period could range from 12 to 24 months.

Typically, life insurance policies will not pay out during this waiting time, but accidental death may be covered, and any premiums already paid should be returned.

After the waiting time, most insurers will pay out if a person commits suicide. However, this can vary depending on the circumstances surrounding the death and the provider.

If your life insurance policy provides for early payment if you are diagnosed with a terminal disease, you may be unable to file a claim during the waiting period. There is usually also a maximum life expectancy. So, if you are projected to outlive the insurer’s total life expectancy, typically 12 months, there will be no early payout.

You outlive a term policy

There will be no reimbursement if you outlive your term life insurance coverage. Term life insurance covers you for a set period, such as 20 years, that you agree to when you apply.

If you are still alive and kicking after that time, your policy will expire, and you will receive no compensation. As a result, any subsequent claims will be denied because the procedure is no longer in effect.

Suppose an insurer denies a claim or offers a lower compensation. In that case, you have options if you believe the decision was unfair or incorrect. If you’re dissatisfied with how an insurer handled a claim, you can escalate it as follows:

  • Speak with your insurer. A bit of additional information can explain or resolve the problem.
  • If the matter has not been handled and you are dissatisfied with the outcome, file a formal complaint with the insurance. The insurer must react within eight weeks and explain how to do so.
  • If you aren’t satisfied with the insurer’s response to the official complaint, or if you haven’t heard anything back for more than eight weeks, file a complaint with the Financial Ombudsman Services (FOS).

Avoid letting a small number of denied claims deter you from obtaining the protection you may require for your family. Remember that a high percentage payment rate is in an insurer’s best interests.


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