Losing a loved one is devastating, and negotiating with life insurance companies only adds to your stress during this difficult time. If your loved one passed away shortly after obtaining life insurance, you may have concerns about how your death benefits will be affected.
This article from Boonswang Law answers the question “what happens if you die a month after getting life insurance?” We’ll discuss how long a policy needs to be active for it to be valid, the implications of the contestability period, and the clauses that may impact your claim settlement. You’ll gain a thorough understanding of potential payout delays and learn what to do during the claims process if the life insurance company denies your claim during the contestability period.
If your life insurance claim has been denied because your loved one died during the contestability period, Boonswang Law can help. Contact us to speak with an experienced life insurance lawyer about getting the benefits you’re entitled to after the loss of a loved one.
How Long Does a Policyholder Need to Have a Life Insurance Policy for it To Be Valid?
Due to the contestability period, a life insurance policy typically needs to be in effect for at least two years to be considered valid. During this time, the insurance company has the right to investigate and potentially deny a claim if they find any discrepancies or misrepresentations in the policyholder’s application.
Once the contestability period has passed, the policy is generally binding, and the insurer cannot deny claims except in cases of fraud or non-payment of premiums. It’s important to provide accurate information in your initial application to avoid complications in the future.
Factors to Consider Regarding Death Shortly After Getting 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.
Accidental Death
Many life insurance policies cover accidental death, but it’s important to review the terms, as some policies designate specific exclusions or limitations if the insured person dies during the contestability period.
Additionally, if the policy includes an accidental death rider, beneficiaries may be eligible for an increased payout, often double the base amount. In these cases, the death must meet the policy’s definition of “accidental” and cannot be the result of risky activities that are excluded from coverage.
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.” If, however, the death may have seemed to be the result of a suicide but the facts and circumstances call that into question, we have helped beneficiaries recover death benefits.
Delays in Life Insurance Death Benefits Due to the Policyholder Dying Shortly After Getting Coverage
If a policyholder dies shortly after obtaining life insurance, there may be delays in the payout of death benefits due to the contestability period. This period typically lasts two years from the start of coverage, and the insurance company has the right to review the application for any inaccuracies, misstatements, or omissions.
If the insurer discovers that the policyholder provided false information or omitted critical details, they may deny the claim or reduce the payout. Additionally, if the death is ruled as suicide within the first two years, many policies include a clause that limits or entirely voids the payout.
Do life insurance companies check medical records after death?
Yes, life insurance companies check medical records after the insured’s death, especially if the death occurs within the contestability period. They review these records to confirm the accuracy of the medical information provided when the policy was purchased.
If they discover any discrepancies, the insurer will likely deny the claim or reduce the payout. Access to medical records requires permission from the policyholder’s representative, but insurers can also use private services to gather relevant health data.
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 or 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 period – we get our clients paid!
