Reasons your life insurance may not pay out

Life insurance claims are generally paid once proof-of-death is supplied. There are a few times when the payment is going to be delayed or possibly not made to beneficiaries. Delays are more common than non-payment of benefits.

There are various reasons where the death requires further investigation and other reasons that will cause a decline of payment. Let’s first look at the reasons your life insurance will not pay a claim. They are fairly easy to define and most make total sense to everyone.  Generally you can look at the exclusions section of the life insurance contract and quickly see what would cause a non-payment of life insurance claim.  To get a bit more detail here, suicide within two years of the insurance policy issue, death while committing a felony, or death at the hands of the beneficiary are three big reasons that most insurance policies will be able to not make a claims payment.

The above reasons will definitely delay the payment of a claim while they decide to pay or not the claim. In addition, suspicious deaths, mysterious disappearance, and when there is questions about who may be responsible for the death of the insured will all hold up payment of the claim as it is investigated. Insurance companies what to make sure before they pay a claim it is a valid claim. The same holds true on the property and casualty side of the insurance world. Think about if your house burns down they want to make sure you did not burn it down intentionally. Likewise when a death occurs they need to check various factors.

In most every death claim you will have to supply a death certificate. Depending on if the certificate was signed by a treating physician or the medical examiner may well determine what if any questions are raised by the insurance carrier. The reason is that a treating physician will typically only sign a death certificate of someone they have been treating on a long term ongoing basis where they can really attest to the cause of death. Medical Examiners are more often involved in death involving criminal acts or suspicious deaths where the medical examiner had to investigate the death. They don’t necessarily dig really deep into the cause if they are pretty sure it was not a murder. In some cases they may rule something a suicide when in fact it was not more than an unfortunate accident. In these situations it can lead to significant investigations by the insurance carrier.

Insurance carriers only want to delay and withhold payment where they legally can do so. When the payment was going to the person who killed the insured is typically the biggest reason aside from suicide where they will push to investigate and not pay a claim. Of course any other situation where fraud may have occurred such as someone knew they were diagnosed with a  terminal disease applies for coverage and get it issued without disclosing that issue. Fraud like that will also cause the policy to be terminated with only premiums paid going back to the beneficiary.

All of this just helps folks understand that doing something in hopes of a low cost large payout using life insurance will just not work long term. Instead those seeking to bend the rules for a large payout will not get it.  That is not to say a legitimate death soon after a plan purchase will be inaccurately declined, it will be paid when legitimate.

Using a good life insurnace agent may help avoid some of the issues mentioned above.