Understanding Life Insurance Claims

Contestable and Non-Contestable Life Insurance Claims

The most common types of life insurance claims are contestable and non-contestable claims. In either case it helps to have an understanding of life insurance claims and the challenges a beneficiary may have in getting their money.

A contestable life insurance 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 life insurance claim is one that cannot be investigated by the insurer because the policy was more than two years old. Non-contestable does not mean 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.

What can delay a life insurance claim?

Insurers are supposed to pay death claims within 30 days of receiving proof of death. Even when a claim is not contestable there are situations where the claim may be delayed.

One example is when there is a competing claim for the policy benefit. If more than one party steps forward to make a claim on a policy the insurer will look at the validity of both claims and if they can make an easy determination they will. When the insurer cannot easily make a determination they will often encourage the two competing parties to come to a mutual agreement or the insurer will interplead the money and let a Court decide who should get the money.

Competing claims are very common for ex-spouses and current spouses when the insured didn’t change their beneficiary designation after a divorce.

In community property states the insurance companies practically encourage competing claims by notifying spouses that they may be entitled to death benefits even when they aren’t named on a policy.

Another common reason a life insurance claim may be delayed is when the beneficiary designation on a policy is not complete or correct. This happens a lot with policies bought at work because no one double checks the accuracy of these policies until the insured has died.

With all claims, proof of death, via a final certified death certificate, must be presented before a claim will be paid. If such proof is not available, this can delay the death claim. For example, if 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), or if the County Medical Examiner is slow to respond.

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 law suits 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. but typically most require prompt payment for a claim within 30 days, once all information has been received by the insurer.

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’s 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.

Need help getting your life insurance claim paid?

When a life insurance claim is being delayed the only obligation of the insurance company in terms of status updates is to send a form letter to the beneficiary every 30 days stating that the claim is being processed. In doing so, the insurance company is typically in compliance with minimum State requirements (minimum being the operative word). In these situations, where a claim seems to be dragging on, and no action is happening, you need the help of a professional through The Center for Life Insurance Disputes.

A life insurance company’s claims department shares so little information with beneficiaries about the status of a claim that it can become very frustrating, especially when also balancing the emotional strain of a loss. In some cases claim processing can go on for years with no resolution, but with the help of an experienced life insurance claims professional delays can be reduced and the claim can get paid quickly.

We’ll Get Your Claim Paid

The Claims department will be very careful about sharing any information directly with a beneficiary because it opens them up to legal liability. However, the insurer will communicate with an appointed representative of the beneficiary. We know the rules, we know the claims process and we know what the insurer’s legal obligations are. As your representative we’ll use every tool and tactic to bring the claim to the forefront and get it paid.