Thousands of Too-New Life Insurance Claims Denied Last Year
Some life insurance companies have apparently cancelled policies belonging to the recently deceased and denied claims if their policies were less than two-years old. A recently investigative report from the Los AngelesÂ Times revealed that thousands of life insurance policies deemed “too new” were not paid to deserving beneficiaries in 2009.
Beneficiaries Denied Claims
According to the report’s data, compiled by the National Association of Insurance Commissioners, $372Â million inÂ life insurance claims were withheld from beneficiaries last year after their loved ones passed away because the companies felt their policiesÂ were too new.
One example would be when American General Life Insurance Co. denied $250,000 in claims to theÂ widow of Ian Weissberger after canceling the policy that he took out the same year of his death.
Despite the fact that his premiums were paid up and there was no foul play suspected, theÂ company told his wife his application was incomplete, citingÂ he did not disclose information on anÂ illness that he didn’t have.
Lucky, his wife was able to reach a confidential financial settlement with the company, but this was after she’d already lost her house because the settlement was reached too late.
More Companies Engaging in This Practice
The report found that while most life insurance companies pay beneficiaries as promised, some would prefer not to dish out hundreds of thousands of dollars when they’ve only received a few hundred dollars from their policyholders. Of course, companies profit in the billions each year from policyholders who paid but had not died, meaning that theÂ number ofÂ times that they have to pay on brand new policies are few.
Nonetheless, companies are citing a number of legitimate reasons to avoid paying for policies. A few include:
- Unpaid premiums
- Foul play by the beneficiary
- Material misrepresentation
Since the companies cannot simply avoid paying because policies are new, they use the above reasons to state that the policyholder or beneficiary did something wrong and therefore doesn’t deserve the money.
How Can I Avoid a Claim Cancellation?
While it’s difficult to avoid a claim cancellation because it can’t be anticipated, you may at leastÂ be able to Â prepare for it. If you are the policyholder, make sure to be completely honest on your application and pay all of your premiums on time.
As a beneficiary, you should know where all of the policyholders’ medical records are, as well as their doctors’ information so that if the policyholder dies, you will be able to prove that they did not misrepresent themselves on the application.
Taking these steps could help to make the fight a bit easier in the event that a life insurer chooses to cancel a policy shortly after death. There’s no doubt that you may be in for a fight if it happens, but at least you could be armed with the information you need to help you win.