In short, the beneficiaries’ claims are more likely to be denied.
A life insurance company is contractually obligated to pay the specified death benefit regardless of when the loved one dies, whether it is four months or forty years after the policy takes effect. While the purpose of a life insurance policy is to provide coverage in the event of a loved one’s unexpected death, if the insured dies within a year or two of obtaining or increasing their insurance policy, the company will look for reasons to avoid paying the claim. This is especially likely to happen if information on the initial application was inaccurate or if it looks like the insured may have committed suicide.
Do life insurance companies check medical records after death?
Yes. The insurance company will look for undisclosed medical conditions and also investigate the facts the insured set forth in the application for life insurance.
The Contestability Period
The contestability period is defined as the amount of time during which an insurance company can review and fact-check information on a life insurance application. If the insured dies during the contestability period, the company will do a full investigation of the individual’s medical records as well as all of the other information requested on the application.
If any medical information was left off the policy application, the insurance company will have grounds for denying a claim or reducing the death benefit. They are only obligated to pay out if all the information made on the policy application was completely accurate. If there were any misrepresentations or falsities, they will invalidate the policy and refund premiums instead of paying the full death benefit.
For this reason, generally, claims in which the insured passed away during the contestability period have a significantly higher chance of being denied than they would after the period expires. Although the length of the contestability period varies (e.g. Missouri is one year), it is two years in most states.
Although it may be frustrating to policy owners and beneficiaries, the contestability period makes sense from a legal perspective. Say you were diagnosed with a terminal illness and decide to take out a valuable life insurance policy so that your relatives can benefit upon your inevitable death a few months later; on the application, you fail to mention your diagnosis such that the insurance company has no idea of your actual condition.
Under the contestability period, the insurance company checks your medical records carefully when you die to check for undisclosed medical conditions. If insurance companies were not allowed to “contest” policies such as this example, they could consistently be taken advantage of by those with terminal conditions.
Know that life insurance companies also use the contestability period to their advantage; if the application asked the applicant to state any diagnosis of an anxiety disorder in his or her lifetime and the insured failed to mention a childhood diagnosis of OCD, the beneficiary’s claim can still be denied even if the alleged misrepresentation has little to do with the insured’s cause of death.
The Suicide Clause
It may seem morbid, but most life insurance policies contain a provision, or “suicide clause,” in which claims can be denied in the event of the policyholder’s suicide. The suicide clause is meant to deter people from buying policies with the intention of committing suicide shortly afterwards, thereby leaving large sums of life insurance benefits for their family members. This clause generally applies during the aforementioned “contestability period,” so if the policyholder commits suicide more than two years after buying the policy, beneficiaries are still entitled to the death benefit.
It is important to note that AD&D policies never cover suicide, which by definition cannot be considered an “accident.”
Was your life insurance claim denied because the insured died during the contestability period?
If a policyholder dies shortly after buying life insurance, the insurance company has more freedom to contest/deny the beneficiary’s claim. Consequently, it is all the more important to contact an experienced life insurance lawyer if your claim has been unjustly delayed or denied. Call us if your claim has been denied because the insured died within the contestability perion – we get our clients paid!
