Reviewed by Chad G. Boonswang, Esq.
Most life insurance claims are paid. When one isn’t, the insurer will point to a reason, and the reason sounds final in a denial letter. In my experience, many of them aren’t. Some denials are correct. Others rely on an exclusion that doesn’t fit the facts, an application error that had nothing to do with the death, or a lapse the insurer caused itself. Here are the 17 reasons I see most often, and what to look for in each.
1. The Policy Lapsed or Expired
If premiums weren’t paid, the insurer may say the policy lapsed. A term policy may also have simply expired. But a lapse doesn’t always end the claim. Look at whether the required lapse notices were sent, whether the insured was still in the grace period, whether a payment was mishandled, whether an employer stopped paying group premiums, and whether the insured qualified for a waiver of premium. My guide to lapse denials covers each of these.
2. Death During the Contestability Period
For the first two years after a policy is issued or reinstated, the insurer can investigate the application and contest the policy. That extra scrutiny doesn’t make a denial valid on its own. The insurer still has to show the application contained a material misstatement. Learn more about what happens when someone dies shortly after getting life insurance.
3. Misrepresentation or Application Errors
Insurers often deny claims by saying the insured gave inaccurate information about health, medications, tobacco or alcohol, occupation, travel or hobbies. An incorrect answer isn’t the same as fraud. The applicant may have misunderstood the question, or the agent may have filled out the application incorrectly. Learn more about false information on a life insurance application and material misrepresentation.
When the error was innocent or unrelated to the cause of death, insurers will sometimes settle for the death benefit minus the extra premiums the insured would have paid if the application had been correct.
4. Employer or Administrative Mistakes
With group coverage through work, the employer or plan administrator may have failed to process a waiver of premium, explain conversion rights, send required notices or keep paying premiums. Most of these plans are governed by ERISA, which gives beneficiaries specific appeal rights. If the policy came through work, an ERISA attorney should review it.
5. Beneficiary Disputes or Errors
Sometimes the question isn’t whether the policy pays, but who gets the money. That comes up when no beneficiary was named, the beneficiary died first, a former spouse is still listed, the beneficiary was changed shortly before death, or someone alleges fraud or incapacity. The insurer may hold the money or file an interpleader action and let a court decide.
A vague designation can also hold up a claim. If the insured named “all my children,” it may not be clear whether that includes children from every marriage, children born outside a marriage, or stepchildren. The insurer won’t pay until that’s resolved.
6. Suicide Within the Exclusion Period
Most policies exclude suicide during the first one or two years. When the cause or intent behind a death is unclear, such as an overdose, a single-car accident or a fall, insurers sometimes label it a suicide without the evidence to support it. Whether the exclusion applies depends on the policy language, the evidence and state law.
7. Deaths Involving Drugs, Alcohol or Illegal Activity
Accidental death policies in particular may exclude deaths involving intoxication, drugs or illegal activity. The presence of drugs or alcohol doesn’t answer the question by itself. The insurer has to show the exclusion fits the facts. I explain this in more detail in my blog covering whether a life insurance claim can be denied for drug use.
8. High-Risk or Excluded Activities
Some policies exclude aviation, racing, extreme sports, mountain climbing or other hazardous activities. The question isn’t whether an activity sounds dangerous. It’s whether the policy actually excludes the circumstances of the death.
9. Acts of War or Terrorism
Some life and accidental death policies exclude deaths caused by war, armed conflict or terrorism. This matters most for military members, contractors, journalists and people working overseas. See my post on the life insurance war exclusion.
10. Homicide or Beneficiary Involvement
Under slayer statutes, someone who unlawfully causes the insured’s death can’t collect the death benefit. If a beneficiary is under investigation, the insurer may delay payment until that’s resolved. Being a person of interest doesn’t decide the claim, and if the primary beneficiary is disqualified, a contingent beneficiary or the estate may still be paid. I explain whether life insurance pays if the insured was murdered in my full blog.
11. Death Abroad
A death outside the United States often means more investigation: confirming identity, getting foreign death certificates and medical records, and checking travel exclusions. A foreign death can delay a claim without making it invalid.
12. No Insurable Interest
A policy generally has to be supported by an insurable interest when it’s issued. Disputes come up with stranger-originated life insurance (STOLI) arrangements, where a policy was bought mainly as an investment by someone with no real interest in the insured’s life. These cases turn on state law and can get complicated quickly.
13. Administrative Delays or Missing Paperwork
Not every unpaid claim has been denied. Sometimes the insurer just keeps asking for more: claim forms, a corrected death certificate, medical records. A long delay without a clear explanation deserves a closer look. My guide to claiming life insurance after a death explains what a complete claim includes.
14. Fine-Print Exclusions
An exclusion only applies if the insurer can show it fits the facts, and ambiguous policy language is generally read in favor of the insured. Two examples from past cases:
- An insured died of autoerotic asphyxiation, and the insurer applied a suicide or self-injury exclusion. The autopsy ruled the death accidental, and the insured had laid out clothes for the next morning. The insurer had to prove the insured intended to injure himself and couldn’t, so the beneficiary was paid.
- An insured died after a motorcycle accident, and the claim was denied because a toxicology report showed amphetamine intoxication. It was later shown that the insured died weeks later from injuries sustained in the accident, not from an overdose, and the claim was paid.
Past results don’t guarantee a similar outcome in any other case.
15. Bad Faith Denials or Delay Tactics
Some denials involve more than a disagreement about coverage: delaying an investigation without explanation, misrepresenting the policy, ignoring evidence, or changing the reason for the denial after the fact. Whether that rises to bad faith depends on state law, but you don’t have to accept an unexplained delay or an unsupported denial letter. Find out whether you can sue a life insurance company in my full blog post.
16. The Policy Conflicts With a Trust or Will
In most cases the beneficiary designation on the policy controls, not the will. But trusts, divorce agreements and conflicting beneficiary forms can create real questions about who is entitled to the proceeds.
17. A New or Replacement Policy
Replacing an older policy with a new one can introduce different exclusions and restarts the contestability period, giving the insurer another two years to investigate the application.
What to Do If Your Claim Is Denied
- Get the denial in writing, with the specific reason and the policy provision the insurer relied on.
- Request the policy, the application, the premium history and the records the insurer used.
- Be careful about handling an appeal alone. What you submit can matter later, especially in ERISA cases.
- Act promptly. Appeal periods, contractual limitations and statutes of limitation can cut off your rights.
- Have the denial reviewed by an experienced life insurance dispute lawyer.
How Policyholders Can Prevent These Problems
- Keep premiums on automatic payment, and name a third person to receive lapse notices.
- Review beneficiary designations after marriages, divorces, births and deaths.
- Answer every application question completely, and review the answers before signing if an agent filled them in.
- Don’t name a minor child as beneficiary directly. A court will have to appoint someone to manage the money. Name a trust or a custodian instead.
- If you leave a job or become disabled, ask about conversion and waiver of premium rights right away.
Was Your Life Insurance Claim Denied?
You don’t have to take the insurer’s word for it. You can review some of my results for life insurance beneficiaries, and contact me for a free case review. I work on a contingency fee, so there’s no fee unless I recover benefits for you.