UNLESS A SUICIDE WAS INVOLVED AND OCCURRED WITHIN CONTESTABILITY PERIOD
Many people mistakenly assume that the cause of death might impact whether the life insurance company pays the claim for life insurance. Under most circumstances, however, the cause of death would only directly impact the life insurance company’s decision to pay the benefit owed (1) if the deceased committed suicide and (2) if the death occurred within the “look back” period, referred to as the contestability period. This rule would not apply to an accidental death policy.
The contestability period, which is two years in most states (including New Jersey, New York, and Massachusetts), allows the life insurance company to review the initial application to ensure that the policy holder accurately provided all the relevant information and did not leave out any details that would have affected the type of policy issued and/or the amount of the premium charged. Additionally, if a suicide occurs within that period, the life insurance company can deny the claim for benefits, on the theory that the policy holder may have been intending to commit suicide when the policy was purchased, and that the insurance company would not have issued the policy if that information had been known in advance.
Within the contestability period, other than a suicide, the insurance company would not be directly concerned with the cause of death. For example, if the insured had a heart attack, that fact in itself would not impact whether the life insurance company pays the benefit owed. However, for any death occurring within the contestability period, the life insurance company is entitled to review the policy application and request the deceased’s medical records, to confirm that all key information had been included in the application. So, for the example of a person whose death was due to a heart attack, the life insurance company would review the application to see if any prior history of heart disease had been disclosed. If a prior history of heart disease had been listed on the life insurance application, the insurance company cannot claim that it did not have all the information necessary to properly analyze the risk of issuing the policy and to figure out the proper premium to charge. It therefore cannot point to the cause of death as a reason to deny payment of the benefits owed under policy (assuming the premiums had been paid on time). Additionally, if the medical history shows that the policy holder had no history of heart disease at the time of the application (meaning that the condition developed later on), the life insurance would not be able to deny the claim based on the cause of death. On the other hand, if the life insurance company finds that some other medical condition was not disclosed on the application, it could deny the claim, even if that other condition was completely unrelated to the cause of death. Similarly, if false financial information or other false statements were made on the policy application, the life insurance could deny the claim.
Beyond the contestability period, the cause of death is generally not relevant to the life insurance company’s determination of whether to pay the benefit. Other grounds for denial are still possible, however, such as failure to pay the premiums.
In summary:
- Within the contestability period:
- Suicide can be basis for the life insurance company’s denial; and
- Other causes of death would not directly be basis for life insurance company’s denial, but could provide the life insurance company to review the application to ensure that any medical information related to the cause of death had been disclosed (if known at the time of the application).
- Beyond the contestability period: cause of death is not relevant
If you recently lost a loved one who had life insurance for which payment was denied or which you fear may be denied, the life insurance attorneys at Trief & Olk are available to answer your questions and represent you if life insurance has been denied. Feel free to consult our website for examples of the many successes we have had when life insurance companies denied payment or call us directly to discuss how we may help you.