After the death of a spouse or loved one who is providing you financial support, one of the first questions that arises is whether the decedent had life insurance. But even if there is a policy in effect, the insurance company may be telling you that payment is being delayed or possibly even denied because your loved one died within the period of contestability.

Another problem occurs if the policy inadvertently lapses, but is reinstated on condition of the insured completing a new application — that triggers a new contestability period.

But once two years elapses from the date the policy is taken out, the policy is deemed “incontestable.” That means the insurance company may not deny a claim based on statements made in the application — unless the insurance company can show that misstatements or deliberate omissions were made with an intent to defraud.

What an investigation seeks to uncover

The contestability period is the first two years after a life insurance policy takes effect. If someone dies within the first two years of the policy’s effective date, the insurance company reserves the right to deny payment in the event statements made in the application for insurance were untrue, even if any misstated information had nothing to do with death; i.e., a history of tobacco use is denied but the insured died in a car accident.

The results of the investigation

If the investigation concludes that the insured misrepresented or omitted important information on the insurance application, coverage may be denied.

If the insurance company denies the claim, you will likely receive a refund of your premiums, but, if the company approves your claim, the payment should include interest for the time the claim was delayed. While insurance companies reportedly dispute only about 1 percent of all claims, this may be of little comfort if your claim is one that has been denied.

If you believe the insurance company has wrongfully denied benefits, you should immediately contact a lawyer for assistance. At DeBofsky, Sherman & Casciari, P.C., we have the experience to help you. We will examine your policy and surrounding facts; and if we determine that the denial was erroneous, with any appeals or litigation that may be warranted.

Related Articles

Behavioral health ruling supports benefit claim appeals

Litigating health benefit claim denials is extremely challenging for plaintiffs. Especially under the Employee Retirement Income Security Act — where many cases are decided under the arbitrary and capricious standard of review that upholds an insurance claim denial so...

Why do health insurers deny claims?

When you are ill and a doctor recommends a course of treatment, you naturally assume that your health insurer will reimburse the cost.  That is not always the case, though, and it is not uncommon for benefits to be denied, especially if the costs are high.  Examples...