Updated for 2018: Over the past few years we've received thousands of visits to our "do life insurance companies pay out" page.
And we've discovered only two types of people search for this:
- Either you're looking to buy life insurance
- or a Life Insurance Company is Withholding Money from You!
Our advice for the two types is completely different, so let us know why you're here, and we'll direct you to the part of the article below for you.
It’s the moment of truth for a life insurance company…
You or a loved one has paid thousands into a policy, counting on its protection, and then death occurs.
Will the life insurance company really pay out the claim?
In almost every case, yes!
There are a few clauses and situations you MUST understand, however.
In this article, we’ll describe how to ensure your policy pays out, when a company might deny (or delay) a claim, why they would do so, and if you have any recourse. If you are looking for some more in depth information regarding the best life insurance companies that pay out, click here!
Quick Guide to Life Insurance Company Payment of Claims
Have a particular question? Use our quick links below:
- When Can an Insurance Company Deny or “Contest” a Claim?
- Reasons a Claim May be Denied
- Death by Suicide – When it Pays (and when it doesn’t)
- Material Misrepresentations
- Life Insurance Companies that go the Extra Mile
- Dead or Missing? How Can They Pay without a Death Certificate
Insurance companies are often given a black eye about paying their life insurance claims, and are commonly torn apart in movies. This false perception generally stems from high profile cases involving well known people such as Heath Ledger, for example.
But is this really a valid perception?
The answer is no. Insurance companies are happy to pay out any legitimate life insurance claim and will even go the extra distance to do so.
Note: Once you get paid, here are 30+ ways to invest your life insurance proceeds!
When an insurance company denies a claim, their reason will be a valid one based on hard evidence alone.
The big reason for this is because the onus of proof to deny a claim falls solely on the shoulders of the life insurance company and not the estate of the person who was insured. The trick is to use an agency that represents only the top rated life insurance companies in the U.S., though.
In the majority of life insurance policies there are generally only 2 reasons why a life insurance company can legitimately deny a claim, so let’s look at these in more detail.
Let’s start by stating that in most life insurance policies there is a clause called the ‘Contestability Clause’.
This is a two year period from the date the policy was put in force which gives an insurance company the right to investigate any and all death related claims that occur within the first 2 years of the life of the policy.
During this period, the insurance company is allowed to obtain medical reports from the insured’s doctors, an autopsy report, and *permits them to interview the insurance agent and friends and family of the deceased.
(* I recently interviewed a Transamerica claims representative, who stated that the vast majority of the time, they only request medical records. It’s very rare that an insurance adjuster or investigator is used like in the movies.)
On most life insurance policies there are generally only 2 reasons why an insurance company can deny a claim.
Anyone who deliberately commits suicide, and only if the insurance company can clearly prove that the death was suicide, within 2 years from the start of the policy can have the claim denied.
The reason for this is simple.
Insurance companies want to ensure that claims aren’t paid out so that their heirs can benefit by a big payday because of a suicide, and that is not only fair but is a reasonable stance. After the 2 year contestability clause is up, it doesn’t matter. The claim is paid.
It’s very HARD to prove suicide.
It might be somewhat of a subjective thing. So don’t let the insurance company harass you and tell you they’re not paying out if there’s ANY doubt that it was NOT a suicide.
Get help from my friends instead! (see below)
Denied Payout for “Apparent Suicide”?
Click Here for Help Getting Paid!
But, what if it looks like suicide? Will they still deny the claim?
Because the burden of proof lies with the insurance company, and there is no clear answer for the cause of death, the balance of probability the claim will be accepted and paid will almost always go to the insured.
Here’s a good example:
My good friend, Rich Fuller, President of CPS-Special Risk Services, used to work in the claims department at Prudential, and told me the following story:
Not so long ago, a young man broke up with his girlfriend. Driving home, he ran headlong into a bridge abutment traveling at 100 mph and died. To many people, it might appear from his actions that his intent was to commit suicide, but nobody could prove what was in his mind the last 3 feet before he hit the abutment. So Prudential paid the claim!
However, be careful of what company you buy insurance from. There are over 800 life insurance companies in the U.S., many of them rated “B” or lower. Be sure to work with an agency who represents the top tier, A rated, life insurance companies like Huntley Wealth. Click here for a quote.
Intentional lies or deliberately withholding key information that an insurance company asks you on an insurance application is another valid reason why an insurance company can deny a claim. After all, if you lied to them why should you get paid?
This must also be proven within the contestability period of 2 years.
But here’s the thing…
“Material Misrepresentation” is also subjective. If a loved one’s policy is being denied for lies, withholding information, or misrepresentation, you can fight it.
Get help from my friends below:
Denied Payout for “Misrepresentations”?
Click Here for Help Getting Paid!
After 2 years, the only way an insurance company can deny a claim is if they can prove there was ‘intentional fraud’. This means they must prove beyond a reasonable doubt that you deliberately lied and this is not near as easy to prove as you might think. A misstatement for example is not fraudulent for example.
It doesn’t matter that the issue you lied about had anything to do with your cause of death either. It’s very simple to avoid. Never lie about anything when you apply for life insurance because if you’re truthful, then there is no issue or reason for the life insurance company to contest the claim. If they ask if you ever smoked, then tell the truth.
Caution: Some rookie insurance agents don’t understand this and can get you in a LOT of trouble by failing to disclose everything on your application. Be sure to use experienced agents like us at Huntley Wealth to ensure your family receives their death benefit if that time comes.
Here’s another reason why this bad rep is undeserved. On that tragic day of the September 11 attack, several of the victims included individuals who had taken life insurance policies but had as yet to pay any premiums because the policies were so new. Basically, the policy only starts when the premium or first premium payment is paid.
So what happened?
Because it was clear that these individuals intended to pay the premium, the claims were accepted by the insurance companies. I call that not only responsible but highly commendable.
One company I’ve seen some negative press about is AARP life insurance payouts. ConsumerAffairs.com only gives them 2 out of 5 stars and there are multiple complaints in there about them withholding money.
Our society has many solitary people. These are people who don’t keep in touch with their families, and have little or no social life. Their passing may go unnoticed but they have a life insurance policy. So, what happens?
This is another example of how life insurance companies go the extra distance for the people they insure and pay out claims. The Department of Social Security has what is called a ‘Death Master File’. It consists of over 86 million names created from social security administration payments.
The file includes information on each decedent, if available, and includes the social security number, name, date of birth, date of death. The database is updated once a week and is scoured by life insurance companies. If they come across one of their policy holders, they take the initiative and pay the claim out to the beneficiary who may not even know the person who named them in the policy has passed away.
Tell me that’s not real service!
What about Missing People?
In other cases, you are unable to produce a death certificate because the alleged death was due to drowning, being lost in the wilderness, or other circumstances that lead to a missing person.
What to Do When a Life Insurance Company Withholds Money from You?
It’s the moment of truth…
Your loved one has been paying for years on their life insurance policy and died, and now the insurance company is delaying or refusing payment.
We’ve seen this before and can help.
First, Click the Option that Most Closely Describes Your Situation
The company isn’t paying because:
- They Said the Claims Forms Weren’t Filled Out Properly
- Policy lapsed / Failed payment
- Disputing cause of death
- Due to Lies / Misrepresentations on the application
- Just stalling / Other
The vast majority of the time a life insurance company fails to pay out in a timely manner, it’s due to an error filling out the claim forms or not providing the proper documentation.
This will cause delays.
So before pointing fingers at the insurance company, be sure you’re following these best practices.
- Read all correspondence from the company carefully
- Answer all questions completely on the “claim form” or “claimant statement”
- Submit a certified death certificate with your claim, along with any other documentation requested (in some cases HIPAA forms or trust certificates are needed)
- Understand that a typical claim should be paid out in 3 to 4 weeks, but if death was during the “contestable period” it is normal for processing to take 3 to 6 months
If you need help, click here:
IF YOU’RE STILL NOT GETTING PAID…
If you’ve followed our best practices for filing a claim and are still not getting paid, read the descriptions below that best fits your situation.
We’ll provide tips on getting paid quickly, and when (if necessary) you should get professional assistance.
There are a handful of circumstances that could lead to a failed (or delayed) payout if the company is claiming the policy lapsed due to failed payment.
Here’s what you can do in each situation:
#1 Payments Actually Were Made:
In some cases, a policyholder may have moved or changed banks, and the typical form of payment to the insurance company changed. Be sure to look through your loved ones checking accounts to see if perhaps payment really was made before you give up on a lapsed case.
You may be able to provide proof that the owner tried to make the payment. If so, the company may change their stance and pay out.
If you can prove payment was made but the company is still arguing the policy was NOT in force, tell our friends at The Center for Life Insurance Disputes.
Or click this button:
#2 – Missed Payments Were Due to Dementia/Mental Illness:
It’s unfortunate, but some companies take premiums from policyholders for 20 or 30 years, but as the owner ages, sometimes they forget a payment or are unable to make the payment due to a mental condition, disability, or confinement to a medical facility. Occasionally someone misses a couple payments, passes away, and then the policy lapses.
These cases are rare, and can typically be fought. We recommend you tell our friends at The Center for Life Insurance Disputes.
#3 – When Payment Should Not Be Made:
There are some instances when the insurance company will not pay out (and shouldn’t have to.)
Say an individual pays into a policy for years, and then sometimes months or even weeks before they pass, they let their policy lapse.
This is not a case of you filling out the form incorrectly.
It’s bad timing, but an insurance company should not have to pay out if a policy legitimately lapsed due to non payment.
Understanding that your loved one received valuable coverage for all the years they paid into their policy is important.
A company will not pay out if they are not legally bound to do so, even for a client they had for many years, but stopped paying their premium.
If you’re not sure, click the link below. Our friends at The Center for Life Insurance Disputes have resolved and helped collect millions of insurance benefits for their clients.
It’s very common for the cause of death written on death certificates to impede a speedy payout. The three most common ones are:
#1 – Death Due to Homicide
If an insured was murdered, a couple things could hold up payment.
First, if the beneficiary of the funds is a suspect or being investigated for the murder, the life insurance company will not pay out until the benefiary has been released of any charges or suspicion. The claims representative will typically work with the investigator to determine this.
In some rare cases, murders are never solved or “closed”. If you or the beneficiary are still not ruled out as a suspect, this could be problematic for being paid. Be sure to tell our friends at The Center for Life Insurance Disputes about your case to see if they can help.
#2 – Death Due to Suicide
When the death certificate lists suicide as the cause of death, the insurance company still typically still must pay out if the policy is beyond the suicide clause, which typically lasts 2-3 years on most policies (not including accidental policies).
But not everyone leaves a “suicide note” clearly stating their intentions…
So what if death occurred during the suicide provision (typically during the first 2 years) but the cause of death is possibly suicide, but not certain?
It becomes the insurance company’s job to PROVE it was suicide for them NOT to pay out.
If a company is withholding money from you due to an “alleged” suicide, many times it can be argued. Explain your case to our friends at The Center for Life Insurance Disputes. They may be able to help.
#3 – Accidental Death Policies – Was Death Really Accidental?
We commonly see complaints from people who owned accidental death policies only, meaning the company only pays out for accidental death.
These cases are typically considered on a case-by-case basis, and you should seek professional help.
Typically, if your claim has been denied, an insurance company will send you a “denial letter” stating the reasons.
One common reason claims don’t get paid out is if the insurance company finds a discrepancy between what the insured person originally wrote/answered on the application, and what they find to be true when investigating the case.
Mark, a 2-pack-per-day smoker, applied for life insurance in 2010. He quit smoking 1 month before the life insurance exam so he could test “negative” for nicotine. He answered “no” on the insurance application to the question if he had ever used tobacco. He got approved at non-smoker rates, and died one year later of lung cancer.
Since Mark died within 2 years of buying the policy, most insurance companies would investigate (including, but not limited to interviewing Mark’s friends and family) and probably find out that Mark was indeed, a smoker!
In this case, they may not pay the claim, because they may deem this as a “material misrepresentation” or an “intentional act to defraud the insurance company.”
Here’s some Ammo you may be able to use against the insurance company:
Was the Misrepresentation “Material?”
“Material misrepresentation” is a subjective term.
In the insurance company’s eyes, they could possibly say anything they can find is “material,” and potentially a reason to deny a claim.
The good news?
It can be argued!
For example, if the insured failed to disclose her most recent doctor’s visit when she saw her doctor for a common cold, but disclosed multiple other medical issues and previous doctor visits, and took a medical exam to buy the insurance, I would seriously doubt an insurance company would blink twice if they found out she did indeed visit a doctor for a cold, which she didn’t disclose.
That’s not “material” or important.
In other words, even if the insurance company had known she had visited the doctor for a cold, it wouldn’t have likely affected their decision to offer her insurance in the first place, or alter her “health rating” or “classification”.
If the insurance company DID deny a claim for this reason, it could probably be argued that the insurance company had plenty of “medical records” and other facts to look at to make their decision, and that failing to disclose (or forgetting to disclose) one doctor visit should not considered “material.”
Our friends at The Center for Life Insurance Disputes could help you make such an argument. Click below to speak to them.
Was the Misrepresentation Intentional?
Another important distinction when talking about misrepresentation is if it was an intentional act by the applicant, or a mere oversight or error.
This also, may be difficult for them to prove.
So don’t cave in too easily.
For example, as I write this, I’m actually looking to buy some additional insurance on myself. One question that always pops up on insurance applications is if your parents had any history of heart disease or cancer prior to the age of 60.
I always answer “no”, although I know my father had bypass surgery around the age of 60 or 61. But I suppose it could have been 59.
My dad lived alone and has since passed and I have NO way of finding out for sure, so I just answer “no.”
But let’s say I died and the insurance company somehow discovered my dad had bypass surgery at age 59. It would be a pretty tall order for them to deny my claim based on a 1 year discrepancy in my answer to them.
In short, even if you have been denied, you may be able to fight it. If you’re not sure after reading this section, click the button below for help.
If you have already followed our best practices for filing a claim, and the company is just stalling, understand the following.
- If death occurred within 2 years of the policy being purchased, the insurance company is probably investigating the case (many policies have a 2 year contestability period which allows them to do this), and yes, it could take months to hear from them
- In most states, if they take longer than 30 days to pay out, interest accrues on top of the amount they owe you, so you may receive MORE than the death benefit when you finally get paid
- Beware of policies with a death benefit below $100,000 – these are the ones insurance companies are notorious for denying/stalling on. They know that no attorney will take a case to recover $25,000, because there’s no money in it for him/her.
Don’t let these big companies push you around.
If you feel you’re getting the run around, don’t stand for it. Get help.
*This article may contain affiliate links, meaning if you buy a product or service we recommend, we may earn a referral fee.*Huntley Wealth Insurance and its representatives do not give legal or tax advice. Please consult your own legal or tax adviser.