What do the words Two-year Contestablility Period and Heath Ledger have in common? The short of it is Heath Ledger owned a $10 Million life insurance policy through ReliaStar Life Insurance who refused to pay the death benefit upon Ledger’s death, since he died within two years of the policy’s issue date, and died under suspicious circumstances. This gives ReliaStar the right to contest the claim. If they determined he died by suicide, they could deny the claim completely. ReliaStar’s holding back of the $10 Million to investigate the case led to a lawsuit.
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In the lawsuit over Heath Ledger’s $10 Million life insurance policy, a settlement has now been reached. It appears Ledger’s 2-year-old daughter, Matilda, will receive a percentage of the $10 Million death benefit from the insurance carrier, ReliaStar Life Insurance Co., rather than all of it.
So why was a lawsuit brought against ReliaStar in the first place? Why didn’t they pay out the $10 Million benefit immediately? Let me tell you right off the bat that I’m on ReliaStar’s side here. Big surprise, right?
Ledger purchased the policy in June 2007, and died just 7 months later of a supposed, accidental drug overdose in January of 2008. This clearly falls under every life insurance policy’s two-year contestability period. What this means is that every insurance carrier is entitled to do a thorough investigation of all deaths that occur within two years of a policy’s issue. If they find that the insured lied on the application (insurance fraud), they can “contest” the claim, or in other words, not pay it out.
In the case of Ledger, ReliaStar acted correctly. Since he died during the contestability period, there were at least three ways they could have gotten off the hook from paying this claim, so they had about 10 million reasons to do their investigation.
- Had they determined he committed suicide, they could have denied the claim. All insurance carriers have a suicide provision on their policies saying they will not honor death claims due to suicide either within two years of issue, or some will never honor the death claim due to suicide. The insurance carrier’s liability in this case would be returning only the amount of premiums paid to them.
- If they found out he had in fact lied about his drug use on the application, they could have contested the claim.
- If they found ANY other “material misrepresentation” on the application, they could have denied the claim, even if this misrepresentation had nothing to do with the cause of his death. For example, if they found out during their investigation that Ledger smoked cigarettes and had lied about it on the application, they could have denied the claim, even though he didn’t die of lung cancer.
Message: Never, never lie about ANYTHING on any insurance application.
There is no set amount of time given to the insurance carrier to conduct its investigation in cases like this, but I could certainly see it taking several months. A carrier’s investigation may include requests for medical records, an autopsy report, and a statement from the agent. In addition, the carrier may depose the deceased’s friends and family members for questioning, as was Mary-Kate Olsen in this case.
I think ReliaStar got a raw deal here with all the negative publicity they received while acting within policy guidelines. Ledger died in June and a lawsuit was brought against them just two months later. That is not nearly enough time to conduct the thorough investigation they were entitled to. Click here for a Quick, Hassle-Free Term Life Insurance Quote.
I hope Heath Ledger’s death does not lead to more unjustified lawsuits against Life Insurance carriers.
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Some states say that the cause of death and the information misrepresented must be related. You have not served your readers well saying what you say in number 3.
I’d rather err on the side of caution. It’s important to keep in mind if you lie about anything on a life insurance application, then die within two years, some companies may try to contest the claim, whether it’s related or not to the cause of death. I don’t particularly care what state you’re in. All I’m saying is it happens, and to be sure it doesn’t happen to you, disclose everything when applying for life insurance. I’m not sure how telling people to be honest about EVERYTHING on insurance applications in order to avoid a contested claim is doing a disservice to my site’s visitors.
Hi Chris.
I agree. Reliastar had every right to investigate Ledger’s death.
Technically he died January 22nd 2008. Here we have a 28 year old male in good health.He takes out a $10 mil policy then dies 7 months later.
The first mention by the media was “Possible suicide” -then it flipped to “Accute intoxication of prescription drugs” and ended with accidental overdose.
The video of him using illegal drugs ( prior to taking out the policy) was damning and enough reason for Reliastar to investigate further into his history.
One of the screening questions most insurance companies ask is if the applicant is currently or has previously used illegal drugs. Would an insurance company insure a person who has admitted to using illegal substances in the past?
Yes, they would insure someone having used illegal drugs but possibly at a lower rating.