You buy life insurance for the purpose of making sure that there’s something sufficient left for your family in the case that you won’t be there. After all, for the monthly premiums you pay, you deserve something out of it.
You can surely die peacefully now, right?
I’d hate to say otherwise, but your family may find that when filing for a claim on your insurance policy, they only end up receiving a portion of the full amount, or even worse nothing.
Based on a number of reasons, from plain dishonesty to a sensitive topic like suicide, you could be denied your claim. In order to ensure that you won’t end up in a sticky situation like this, here are 8 reasons your insurer may refuse your claims.
1. Lying on your Application
You really wanted to be approved for that insurance app, so you deliberately leave out a few things. What they don’t know won’t hurt them! And plus, the underwriter’s looking at your application to ensure its accuracy anyways, so if they do approve it, that must mean they overlooked that little white lie, right?
Not at all. When writing your application, the onus is on you to provide accurate information. In some cases, the information you failed to disclose could’ve been a major deciding factor in whether or not to insure you. The most important thing to keep in mind is to be truthful during your application so that your words or the words you left out, won’t be used against you.
2. Death During Contestability Period
Most insurance policies contain an incontestability clause, which prevents the insurer from stating that a policy is void due to a misstatement by the insured, after a specific time (usually 2-3 years) has passed. During the contestability period though, your insurance company has a lot more room to refuse to pay a claim. Your entire insurance application will be analyzed, which just stresses how important the previous point is, to provide reliable information. They will also have access to your medical and legal records.
The most important thing to remember is that your insurer must still pay the death benefit if death occurs during the contestability period, but your application and the underwriting process will be scrutinized to make sure that the claim is based on good information.
3. Failing to Pay Your Premiums
|
When you miss a premium payment, it isn’t the end of the world. Most life insurance companies offer a 30-day grace period for payment. During that time, your policy will still be in effect. However, after the grace period expires and the payment still has not been made, a policy lapse takes into effect. This terminates your coverage, making no benefits payable. |
Expert opinion from Daniel Audet “Making sure that your claim is not declined starts with underwriting: 1. Choose a company who does the underwriting at time of application and not at time of claim (post-underwriting). 2. Be truthful when answering all the questions of the application and any additional information request. 3. Should the company require more information such as a doctor’s report, do not view this as a burden, be patient, this means that the information the underwriter has on hand is not sufficient. The request for additional information will provide the underwriter with all necessary information to make the best possible decision, have all the facts and avoid problems at time of claim, such as a denial of payment. 4. Review your policy contract once you receive it to make sure all information is correct and that your insurability has not changed since signing your application.” – Daniel Audet, Associate Vice-President, Individual Insurance and Investments, Assumption Life |
When you miss a premium payment, it isn’t the end of the world. Most life insurance companies offer a 30-day grace period for payment. During that time, your policy will still be in effect. However, after the grace period expires and the payment still has not been made, a policy lapse takes into effect. This terminates your coverage, making no benefits payable.
Expert opinion from Daniel Audet
“Making sure that your claim is not declined starts with underwriting:
1. Choose a company who does the underwriting at time of application and not at time of claim (post-underwriting).
2. Be truthful when answering all the questions of the application and any additional information request.
3. Should the company require more information such as a doctor’s report, do not view this as a burden, be patient, this means that the information the underwriter has on hand is not sufficient. The request for additional information will provide the underwriter with all necessary information to make the best possible decision, have all the facts and avoid problems at time of claim, such as a denial of payment.
4. Review your policy contract once you receive it to make sure all information is correct and that your insurability has not changed since signing your application.”
– Daniel Audet, Associate Vice-President, Individual Insurance and Investments, Assumption Life
4. Insufficient Documentation
A death can take a huge toll on family members, but it’s important to file the claim in a timely manner with the appropriate documentation. A death certificate from the funeral home isn’t considered sufficient documentation instead, the beneficiary must fill out a claim form and submit it to the insurance company along with a certified death certificate. Similarly, they might ask to submit all the previous medical records of the deceased in order to receive the claim. That said, finding all the previous documentation might not be easy as they may have been misplaced. It may therefore be wise to ask your lawyer who is handling the claim settlement to help in retrieving the necessary documentation. The lawyer can then get in touch with companies that provide medical record retrieval for law firms and get the required records necessary for claim settlement.
5. Policy Exclusions
Insurance companies may include “policy exclusions”, which are conditions for which the insurance policy does not cover. Not all policies will include every exclusion, but the following are merely the most common ones which could appear.
6. Hazardous Activities
If there are many risks associated with your job or the thrill-seeking activities you participate in, the danger is considered unnerving to many insurance companies. Therefore, if you’re a skydiver, miner, rock-climber and the like, your beneficiaries may not receive anything from your policy in the case of an activity gone wrong.
7. Act of War
Wars can have devastating effects on entire countries, continents, your insurance company and you. In order for your insurance company to maintain its livelihood, they need to make sure they won’t be faced with millions of costly claims during a time of war. Since they can’t afford to pay out these claims, a war exclusion clause is usually included in the insurance contract, which means the insurer isn’t obligated to pay for losses caused by acts of war.
8. Death During Military Service
For those who participate in active military service, a regular civilian life insurance policy won’t cover you in case of death. Instead, you should be looking for special military insurance policies which pertain directly to active Canadian Forces members. Veteran Affairs Canada also pays a death benefit to the spouse and dependents of Canadian soldiers who passed away during a war.
8. Suicide
Many people believe that in the case of suicide, nothing will be paid out. However, that isn’t entirely true. Many life insurance providers won’t pay out suicide-based claims at all, while others have exemption periods. The truth is in the fine print most policies will contain a one-year or two-year suicide clause. This means that if you commit suicide within the time indicated in the clause, the beneficiary will only receive the premiums back and not the death benefit. If the suicide occurs after the indicated time in the clause, the insurance company will treat it the same way as a traditional claim.
