Life insurance is a great way to provide security and peace of mind to you and your family. The payout can help with debt, school fees, funeral costs etc. Some of the most important questions that someone should ask about a life insurance policy are the terms and conditions surrounding the life insurance payout on the occasion of the payee passing away. Why would life insurers deny certain life insurance claims?
This is an uncommon situation, but it is crucial to know the ways in which your life insurance policy would be considered void. This is because if it is considered void, your family will lose out on the funds that can help them live a financially secure life, despite the hundreds and thousands that you would have paid in premiums (presumably).
You have failed to disclose any medical conditions
When you apply for life insurance, you are requested to disclose any medical conditions you have and anything that runs in the family. You are also asked to disclose any lifestyle habits you have, for example, smoking, or dangerous hobbies. If you fail to disclose any of this information, your life insurance claim might be denied. That is because medical conditions and lifestyle choices are what determine the rates for life insurance.
False statements, misleading information, or omission of facts are all reasons why your life insurance can get denied. Suppose you convey misleading information to your insurer or completely omit something. In that case, the insurer cannot charge accurate rates and therefore, you are not being charged according to your risk category. This makes your policy wholly null and void should you pass away.
Some of the most important information you should be completely honest about with your insurer are:
- Medical history: This is anything that is currently affecting your health, anything that used to affect your health, prescription history, as well as the family’s medical history.
- Risky hobbies: This could be sky diving, car racing, mountain climbing, scuba diving, etc.
- Problematic behaviour: This could be smoking, any criminal records, dangerous driving, traffic violations, etc.
- Dangerous occupation: If you work in the military, as a construction worker, as a firefighter, as law enforcement, a pilot, and more, you’ll be considered as working a dangerous occupation, and this changes the rate of your life insurance premium.
You did not pay your premiums
In some cases, beneficiaries would want to claim the life insurance payout without realising that the premiums had not been paid before death. If you are behind your life insurance payments, be sure to focus on this. Your beneficiaries might not be able to claim the insurance money if the premiums have not been paid for very long post the payment date. This is crucial if you want to support your family, because if you are not up to date with the payments, the claim will be denied.
The best way to avoid being late on your premium payments is to have the payment deducted automatically from your banking account when it is due.
The type of death wasn’t covered in the policy
Life insurance policies often have terms and conditions about what constitutes a death that requires a payout. Such exclusions include death by suicide, drug and alcohol abuse, homicide, illegal activities, and acts of war such as terrorism. These exclusions are worded very carefully so as to encompass as many scenarios as possible that can be used as reasons to deny your claim for a life insurance payout.
You didn’t update the beneficiary after a major life change
After getting married and having children, oftentimes, people want to change the beneficiaries on their life insurance. Usually, the beneficiary is also changed in the event of a divorce or separation. If you fail to change the beneficiary, even though you would not want the payout to go to the beneficiary listed on file, this person will have a claim to the life insurance payout. This means that the claim would be delayed because the insurance company must prepare the necessary documents in order to determine who the ultimate beneficiary of the payout is. Therefore, instead of the payout going to the people you intended to receive it, there would be multiple claims on the insurance policy, which will lead to legal fees.
Your beneficiary is a minor
Keep in mind that anyone under 18 cannot accept the life insurance payout should you pass away. Make sure that you have not named a minor as the beneficiary, because this payout can only be accepted by their guardian. Ultimately, this guardian might not be the person that you trust with ensuring that this payout gets to the minor you have named on your policy. Therefore, if you’d like a minor to receive these funds, make sure to select someone in their stead who can keep the money safe for them until they turn 18.
Final Words
Protecting your family and loved ones is of the utmost importance, and a life insurance plan is essential. This protects them financially if you were to die, because it would give them a safety net for them to resume their lives without any financial worries. The take-home message from this article is to be completely honest and open with your insurer, make sure to read the terms and conditions of your policy carefully, and make sure that the beneficiary of the policy makes sense. It is difficult for your claim to be rejected, but certainly possible, and you don’t want this to happen; it would put your beneficiaries in a sticky situation with regards to the money that they deserve, but ultimately, cannot claim.
Here at IVALIFE, we put the client first by offering a variety of life insurance options. We even have a sum-insured calculator to help you understand exactly how much you would be paying for premiums. If you are not sure which one is best for you, you can contact us, and we will answer any of your questions. Just call us on (+356)22269500, or email us at [email protected].