Death Claims in Life Insurance- Why a policy Won’t Pay

Death claims in life insurance…..seems they would go hand in hand together? Not always.

Let’s cover the topic in death.  Death claims in life insurance can have several reasons they won’t pay but what are they?

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Let’s take a look.

Death Claims and Life Insurance

What gives a life insurance company grounds to not pay death claims? When must a life insurance company pay a death claim? I get this question all the time. I will be talking to a potential client who calls to discuss life insurance options and after a few minutes of discussion, I often get the question of……

  • Well, I have read about this scenario…. if this happens will they pay?
  • I do not want to leave anything out because I am scared my death claim will be denied, will it?
  • Does my life insurance policy cover me if I am killed in a car accident?
  • What exactly does my life insurance policy cover?
  • Can the life insurance company turn around and say, “we are not paying the claim?”

After fielding this question time after time, I have decided I should share how life insurance contracts work.

  • After fielding this question time after time, I have decided I should share how life insurance contracts work.
  • When are they responsible to pay the claims?

It seems too many people are giving up on purchasing coverage because they are too nervous. Not nervous about spending money, nervous that the protection for their family does not exist. This is a huge misconception and needs to be explained in depth. Knowing how life insurance carriers handle claims is a big step in feeling comfortable when buying life insurance. Without a full understanding, you may not even be feeling more at ease with a purchase. Or worse, you may not even purchase at all.

I think this question is coming from a mass amount of information that is currently published on the internet. The thing to keep in mind is that laws do exist. It is best to understand them so that you can feel comfortable with your life insurance purchase.

Life Insurance Policies ARE a Legal Binding Contract- Death claims in life insurance part 1-

I have seen different reviews on various websites and social media platforms where people share their horror stories. Horror stories of what they have been told and why a death claim was denied. It seems that when you read into the entire situation it is a mix of misinformed clients, consumers, and agents relaying information that they are misinformed on. Let’s start diving in on some of the basics before explaining the death claim process.

A life insurance policy is a unilateral contract of adhesion. The primary purpose of the insurers’ side of the bargain is to pay a stated death benefit in the event of a death. Legally, this is a condition that can only be met if the client or consumer holds up his end of the bargain; paying the premiums.

When you miss a life insurance premium, your life insurance policy will enter a “grace period”. This will typically be 30 days to reconcile the account before the life insurance policy lapses. Once you have lapsed your life insurance policy, you have removed the obligation from the Insurance Company.

It does not matter how long you paid your premiums before lapsing your life insurance policy. If you do not pay the premiums within the guidelines of the contract, the insurance company is not going to pay the death claim nor or they legally liable to do so.

You have two parties to these legally binding contracts- Death Claims in Life Insurance Part 2

  • Promiser (Life Insurance Carrier)
  • Promisee (Client or Consumer)

The life insurance carrier in this instance is making a promise to pay a full stated death claim in the amount of the policies stated, “face value”. You as the promisee are the one receiving this death claim in the event of the death if you have met the conditions. Conditions of paying your premiums by the stated time outlined in the life insurance policy.

The Condition is Fairly Simple to Understand to make a Life Insurance Contract Valid and Death Claims to be Paid

Three things will always need to take place for a contract to be valid and for the life insurance company to have to pay a death claim:

  • Timely payment of premiums (pay your premiums at the stated time each month, quarterly, semiannually or annually)
  • In almost all contracts, you CANNOT commit suicide in the first two years
  • You must submit a death claim to your insurance carrier post-death

If you have met these first three conditions your already on the right track to have no issues. We will dive into some of the formalities and other terms shortly. Remember that when you enter in this contract with a life insurance carrier, it is considered a “contract of adhesion”. It is either accepted or rejected. Plain and simple. If you apply and disclose all the relevant facts to your life insurance agent, the insurance company can either say yes or no. Plain and simple. When the life insurance carrier proposes a certain premium in exchange for your coverage, there is no negotiating. Period.

It is not the same concept of going to a used car dealership and wheeling and dealing for a better price. Proper steps can be taken to ensure you are getting the best offer. At the end of the day the offer is the offer and it is not open for debate. You can either take it or leave it so to speak.

The Life Insurance Application and Policy is the Entire Contract- Death Claims in life insurance part 3

Many of the horror stories I hear always seem as if someone is hiding paperwork. Or, times when the client has been misinformed. My goal is to help clear up how some of this works.

There is no hidden paperwork or clauses for your life insurance contract. The Life Insurance Policy contains everything you need to have and need to know. You have three ways to get to this policy after approval initially:

  • Electronic Delivery (very common in today’s age- email delivery to print if desired)
  • Mail Delivery (receive your bound life insurance policy via the USPS mail system)
  • Agent Delivery in Person (Your agent physically hand delivers your policy to you)

For now, those are the three ways to have everything you need. I am sure some form of technology will come out someday that alters one of these in some fashion. You need all important information related to your policy contained within these documents. If the policy is delivered electronically, take a few steps to ensure you have it always handy.

  • Download and print your policy
  • Place your policy in a fire safe or safe place
  • Inform beneficiaries or someone you trust of its location for speedy retrieval in the event of your passing

Signing your Delivery Receipt

We previously mentioned how the life insurance policy can legally be delivered. What we did not mention is that your signature is legally needed at time of delivery. This is your chance and time to do your due diligence. You have every right and opportunity to read and review your life insurance policy. Look it over carefully. Review the terms of the agreement. Make sure it looks like what you initially applied for and what was told by your Agent.

Like all other legally binding contracts or paperwork you have completed in your lifetime, you will now be asked to sign the delivery. In today’s era, you will often be asked to do this electronically. A lot of people seem to be skeptical of this. As to why? I am not sure. It still holds the same legal power of a contract signed with a wet pen and paper in person.

Completely things electronically have become a more powerful tool in the life insurance industry. Mainly because of convenience and the technology available. People are too busy these days for an agent to drive to them while they sit and read the documents before signing.

So now we have covered some of the basics. You have your life insurance policy. It is in force and has been paid on time. You have read the entire contract and accepted delivery. Let’s dive into the reasons why a life insurance carrier may not pay the death claims. Before doing so we need to cover one other big topic known as….

The Incontestable Clause- What is it? What does it Mean?

The biggest thing to understand about the incontestable clause is that it was put in place to favor you. You being the consumer/client. It is a legal provision designed to protect you and your beneficiaries. All life insurance contracts have this clause built into it.

Its basic premise is to place a statute of limitations on the insurance company to dispute fraud on life insurance policies. It gives the life insurance carrier two years to dispute any form of fraud on the life insurance application. Or any fraud that took place during the life insurance application process.

The goal in mind was that life insurance policy beneficiaries would continue to be punished for the policyholders wrongdoing. Especially if unlimited time could discover the wrongdoing. Not only that, but often innocent mistakes are made. The state insurance regulators and lawmakers did not find it fair for the beneficiaries to be punished for innocent mistakes made on the life insurance applications.

The Insurance company wants to pay the death claim. Trust me.

Insurance carriers build credibility through the timely paying of death claims. At the end of the day, the life insurance carriers are like any other business. They want the business. They want strong reviews and reputations. The last thing they want to do is be dragged through the media for denying the death claim that you are entitled too. If the stipulations laid out in the contract are met, you will not have issues collecting timely payment of the death claim.


So, we covered the basics of the incontestable clause and how it operates. The incontestable clause is built on the premise of protecting against innocent misrepresentations. What we did not cover is that the incontestable clause even remains in effect in cases of fraud. That’s right. I meant what I said. Fraud is also covered under the incontestable clause. This is again to protect the insured and beneficiaries from not only accidental concealments but also purposeful and deliberate concealment.

The point being, life carriers act as if they permit or encourage this behavior. They do not, and you should not ever be looking at gaining life insurance through this method. However, it is putting a time stamp on how long the insurance company must investigate or uncover the fraud to void the life insurance policy.

It makes a lot of sense when you break it down. If the state laws and insurance carriers had no time clock on these matters, every death claim would be investigated. It would feel impossible to ever claim a death benefit.

3 Situation Exist where the Incontestable Clause is Invalid:

  • The policy owner or applicant lacks an insurable interest
  • The exam (physical) was fraudulently taken by another party
  • The policy was originally only taken out with the intent or murdering the insured.

That’s right. Murdering the Insured Will NOT get you Paid

If one of the situations listed above is the result of a life insurance policy, you can count on the life insurance carrier contesting the claim. Murder is one law that is not going to allow a beneficiary to collect proceeds under most circumstances.

What does Contesting your Policy Really Mean?

The incontestable clause will again hold true if a life insurance company wants to contest your policy or claim. They again have two years to do so. It will need the life insurance carrier to take legal action to do so. What they are essentially doing is stating or creating an argument. That being the life insurance policy was never or is no longer valid.

They have the options in this situation to do one of two things:

  • Rescind the policy in an appropriate court and jurisdiction
  • Seek to not be liable to enforce the contract

So, when does your two-year incontestable period begin running? When does the clock start? It begins the day following the date on the policy. In some circumstances, it can also begin running the same day as effective in force life insurance coverage.

So, what is excluded under the Incontestable Clause? Death Claims in life insurance explained

So, by now it is easy to see that the biggest number to keep in mind with a life insurance policy is two years, IN MOST CIRCUMSTANCES. There is a group of exclusions that do not pertain to the incontestable clause that fall under a completely different scope. If any of these following items apply to you, your claim situation may be at risk.

  • Dangerous activities exclusions- aviation, drugs, alcohol, and suicide
  • Non-timely payment of premium payments
  • Faking or using someone else to take your medical exam
  • Having no insurable interest at the start of the life insurance policy (wagering contract)

Suicide and Life Insurance- When it is covered- When it is Not-

Sometimes you find life insurance carriers who will include suicide coverage from the start date of the policy. Most of the time, this will not be the situation. As a rule of thumb, suicide will not be covered during the first two years of the policy’s start or active date of in force coverage.

The life insurance policy should always have this exclusion outlined in the hard or digital copy of the policy. If nothing, it is stating otherwise in the policy. It is a covered form of death from the life insurance carrier. Exclusions and provisions must be detailed and explained within the policy. This goes back to “entire contract” definition that we discussed earlier.

Sanity is a big deal with this provision

The definition of suicide usually must include the word “intentional” inside of it. For insurance purposes, this is a key element on if your policy is covered or not. Sanity makes a big difference. Being considered sane or insane could be the deciding factor on if your beneficiaries will be collecting the death claim on your life insurance policy.

The main purpose of creating the suicide clauses in the first place was to protect the insurance company against people planning on committing suicide. All while still wanting to provide a hefty death benefit for the family.

The good news is that even if suicide is excluded with your life insurance policy during the first two years, the life insurance carrier handles returning the premiums paid into the policy.

Unless you Live in Missouri

In Missouri, the suicide clause is a little bit different. It must be proven that you were contemplating suicide at the time of taking out the policy for the contract to be invalid. This is one state that is different than the other 49 for the suicide clause.

Minus Missouri, the biggest thing to remember about the suicide exclusion is whether you are sane or insane at the time of suicide. It will ultimately decide whether your life insurance policy contract is valid at the time of death.


As you can see, death claims in life insurance aren’t always the perfect match.

The items we have discussed are reasons why a Life insurance carrier may not pay a death claim. A lot of people believe that there is this huge gray area with life insurance claims which is not true. It is all laid out black and white.

The best thing you can do is read your entire policy. Look at exclusions and provisions. Make sure that the contract is what you were expecting when you originally applied. Keep the contract safe and continue to keep in touch with your life insurance agent.

Make changes to your policy when necessary. Make sure listed beneficiaries on the policy are changed when you wish for them to be. Treat your life insurance policy like any other legal contract. Give it the priority of importance to keep up with.

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Resources – BusinessMirror