How to Get Life Insurance Claims Paid
Getting a life insurance claim paid can be a complex and lengthy process, but an understanding how the process works can assist in getting a delayed or denied claim paid.
Contestable and Non-Contestable Life Insurance Claims:
The most common types of life insurance claims are contestable and non-contestable claims. A contestable claim refers to a life insurance policy that is less than two years when the insured person dies. The insurance company has the contractual right to investigate the validity of the original application for any reason(s) they should not have issued the policy. If a reason is found, the policy will be cancelled and the premium payments are refunded- no death benefit will be paid. A non-contestable claim is one that cannot be investigated by the insurer because the policy was more than two years old. Non-contestable does not imply the claim will be paid immediately. Specific documentation must first be provided by the beneficiary in order to collect the death benefit, such as the insurance companies claim form and a certified death certificate. Some insurers may request an obituary notice, but this is not required. If an obituary is not available and the insurer insists upon it, this can be disputed with the help of an insurance expert.
What can delay a life insurance claim?:
When a death certificate is not available, this can delay the death claim. For example, the death occurred in a foreign country where the standards of documentation are not compatible with that of the United States, or when someone goes missing and is presumed dead and the physical remains are not accounted for (more common than one may think). The insurers are allowed to delay the payment of a death claim when a death certificate has not been produced. A life insurance policy states that benefits are payable upon “proof of death;” and if adequate documentation of a death cannot be produced, the insurance company is within their legal right to delay the payment of the claim.
What if you do not have a death certificate?:
In situations where a death certificate is not easily obtainable, there are alternative actions. For example, a court can issue a declaration of a person’s death if the insured disappears and is determined, beyond a reasonable doubt, to be deceased. This declaration can then be submitted to the insurance company as proof of death.
Why does the death claims process take so long?:
One of the biggest concerns for an insurance company is that they do not pay a claim that they should not have paid. This is the primary reason why the claims process can take so long. Until recently, contestable death claims were primarily reviewed for misrepresentation of material information. In other words, investigating the validity of the information supplied by the applicant, as this would impact the insurance company’s decision to offer the policy. Wrong information provided can delay the death claim process, whether it was intentional or unintentional by the policy holder. In non-contestable death claims, due to concerns about insurable interest and a significant number of lawsuits related to insurable interest, insurers may take a closer look before they will pay the benefit. An insurer may investigate policies that are 5 years old before they will pay or deny the claim.
Most state insurance codes are vague in their language as to when a claim must be paid. Most states require prompt payment for a claim, typically within 30 days, once all information has been gathered. It is the vagueness of “all information gathered” that is at issue. Each insurance company will define this process differently. It certainly includes the items mentioned above, but it can also include lengthy paperwork such as getting manager and attorney signatures to approve and sign-off on a claim. Not all death claims are handled the same and not all insurance companies work the same. One company may pay very quickly while another may take many weeks.
Often beneficiaries ask if their State’s Insurance Commissioner can force the insurance company to pay the claim. While it is possible for the State Insurance Commissioner to put some pressure for a claim to be paid, it is not typically seen in practice. Thankfully, like other life insurance death claims that are delayed or have been denied, there are solutions which will get these claims paid.
Steve C. Burgess is uniquely qualified to opine on standards and practices within the life insurance industry as it applies to the approval and denial of death claims, the process of investigating death claims and the standard practices of life insurance companies as they apply to death claims handling. Since 2006, he has represented claimants in the recovery of numerous death claims and recovered death claims totaling over $50 million dollars. He has worked on death claims from companies such as Penn Mutual, Prudential, MET Life, American General, HSBC, Globe Life, National Life of Vermont, Sears Life, Farmers Insurance, John Hancock, State Farm, National Life of Vermont, Farmers, Sears Life and State Farm. "In the scope of this work I have seen the standards and practices of life insurance company’s claims departments as well as their legal department’s treatment of claims decisions."
Copyright Steve C. Burgess
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Disclaimer: While every effort has been made to ensure the accuracy of this publication, it is not intended to provide legal advice as individual situations will differ and should be discussed with an expert and/or lawyer.For specific technical or legal advice on the information provided and related topics, please contact the author.