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Miami Insurance Claim Lawyer Explains Why Insurance Companies Rescind Life Insurance Policies and Deny Claims

Thu Sep 30th, 2021 on     Insurance Claims,    

Many people take out life insurance policies so they can rest easy in the knowledge that their loved ones will be cared for after they are gone. What they do not anticipate is that the insurance company will rescind the policy or deny the claim, leaving their family without the support they need. This can be a nightmare scenario for families dependent upon the life insurance funds to help them with their daily living. In order to help you avoid having this happen to you and your family, our Miami insurance claim lawyer explains the reasons why these rescissions and denials occur.

Rescission & The Contestability Period

When a life insurance policy is rescinded, it is as if the contract between the insured and the insurer never occurred and there was never a period of time when coverage was in effect. The most common reason for rescission is a material misrepresentation on the application. If your insurance policy has been rescinded, it is in your best interest to consult with a Miami insurance claim lawyer

A contestability period is a period of time that an insurer has to investigate and rescind policies. In Florida, the contestability period is two years. This means that if the insured dies within the first two years after the insurance policy is issued, the insurance company will likely investigate to ensure that the information provided on the application was accurate. If the insurance company’s investigation determines that there were fraudulent representations made on the application, it will reimburse the beneficiaries any premiums paid, but not pay the death benefit. It is important to note that the misrepresentation made does not even have to be related to the cause of death. Reasons policies have been rescinded in the past include:

  • Failure to disclose minor ailments and any treatments received for them
  • Incorrect responses listed by the agent on the application
  • Incorrect weight listed
  • Incorrect income listed
  • Failure to disclose tobacco use
  • Misrepresenting immigration status
  • Failure to disclose a mental disorder

After the two-year contestability period is over, it is rare that a life insurance policy is rescinded. 

Life Insurance Claim Denials

A life insurance claim denial occurs when a claim is made under the terms of the insurance policy and is denied with no payout, although premiums that were paid may be refunded. There are a myriad of reasons why a life insurance company will deny these claims. 

Failure to Disclose

If you have ever applied for life insurance you know the amount of paperwork that is involved. There are many questions and often a required health exam. Failure to truthfully and completely answer these questions is a common reason why life insurance policies are denied. Some tips from our Miami insurance claim attorney to prevent this from happening include:

  • Take the application process seriously and carefully consider each question asked. 
  • If you are confused by a question, ask your agent for clarification. 
  • Do not lie. While it may seem like a small issue to you, failing to disclose pertinent information may be the reason your family is without the coverage they need after you are gone. 
  • Fully explain your responses. The application process may be lengthy, and you will be tempted to rush through the questions. Instead, take your time. 
  • Review your answers fully before signing off on the application to be sure you have not erroneously omitted requested information. 

Lapse of Policy

A premium is a payment that is made for life insurance coverage. Depending on the policy purchased, premiums may be paid monthly, quarterly, or annually. It is important that you agree to a premium that you can easily afford as failure to pay your life insurance premiums can lead to cancellation of your policy or denial of a claim. Your premium amount depends on how much of a risk the insurer considers you to be. The less risk that you will die in the near future, the less the amount of your premium. Conversely, if you are ill with many health problems, the higher your premium will likely be.

Death by Beneficiary

Most insurance companies will not pay a life insurance claim when the beneficiary is under investigation for murdering the insured. They may pay, however, once the accused has been cleared by the investigating authorities. There have also been cases where the beneficiary purchased the life insurance policy fulling intending to murder the insured so they can collect the payout. In cases like this, the life insurance policy will not pay the beneficiary the proceeds from the insurance policy.

Risky Behaviors

Skydiving, bungee jumping, and mountain climbing are all activities that involve an inherent risk of injury or death. Because of this, some insurance policies contain exclusions for deaths that occur while participating in these or similar activities.  

Death by Suicide

When an insured commits suicide, the insurance company will generally not issue the death payout if the suicide was within two years of the policy being issued. After the two years have passed, the insurance company will typically pay the death benefit.

Outliving the Terms of the Policy

Whole life insurance coverage does not have an end date and the insurer cannot refuse to renew it. Term life insurance is different. A term life insurance policy only exists for a specified period of time and the insurer is under no obligation to renew it. A term policy will pay the beneficiaries the death benefit amount if the insured dies while the policy is considered active; however, once the terms have expired, there is no payout for the beneficiaries. Term insurance policies do not build any equity and any claim made by beneficiaries after the date of expiration will be denied. 

Consult with a Miami Insurance Claim Lawyer

If you have had a life insurance policy rescinded or a claim denied, you need to contact our firm to schedule a consultation with an experienced Miami insurance claim lawyer. Our attorneys have decades of experience in insurance litigation and are committed to obtaining the best results possible for our clients. 

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