Life Insurance Claim Denials - Five Things to Know

Your life insurance policy is a very important part ensuring that your loved ones and dependents are cared for in the event of your death. However, there are some critical mistakes that people often make that can actually prevent the insurance claim from being paid out at all. Here are the five mistakes you should always avoid.

#1 – Failing to Pay Premiums

The only way that your life insurance policy is going to remain active and cover you in the event of your death is if you make sure to pay the premiums on time every time. You should check with your insurer to see if you have any kind of grace period in the event that you accidentally miss a payment or a financial setback makes you unable to pay your premiums. Similarly, opting to make annual or semiannual payments may help, too.

#2 – Lying on the Application

One of the biggest mistakes people make is actually lying on their life insurance applications. There’s no denying that your premiums will be higher if you smoke, but your insurance company will find out if you’re a smoker and deny your benefits if you’ve lied about it. If you’ve been treated for any condition in the past, if you smoke, or even if you drink alcohol more than moderately, you should state this on the application. It’ll be worth it if the unexpected happens.

#3 – Not Naming Enough Beneficiaries

If you’re married, then chances are that you’ve named your spouse as your primary beneficiary. This is the normal way of things, but there is something to consider: what if both you and your spouse are killed in an accident at the same time? How would the life insurance money be dispersed? Be sure to name not only just a second beneficiary, but also a final beneficiary. This covers all of the possibilities and ensures that your benefits are paid promptly.

#4 – Failing to Tell Anyone that the Policy Exists

Life insurance can be a touchy subject for many families, but that doesn’t mean you have to hide it. Once you’ve purchased a policy, store it in a safe place and tell your beneficiaries about it. This way, should something happen, they know exactly where to go and who to contact to get the process started. Failing to tell anyone doesn’t mean that the benefits won’t be paid because the insurer will track down the beneficiaries, but this process can take a while.

#5 – Engaging in Risky Behavior

Believe it or not, people have rushed out to purchase life insurance policies prior to engaging in risky activities like bungee jumping or parachuting, and there are even some who purchase a policy just days before committing suicide. It is important to note that most policies have a one- to two-year exclusion, meaning that if you die due to suicide or a risky activity, your policy is essentially null and void.

Life insurance is certainly a necessary investment, and taking the time to purchase a policy at all shows that you care about what happens to your loved ones after your death. However, if you make any of the five mistakes above, you might just find that all of your efforts were in vain.