What happens if someone dies shortly after getting life insurance?
A life insurance company is in a legal binding to pay the death benefit. It is regardless of when a loved one passes away, whether it is four months or forty years. However, it depends on the terms of the contract as well.
The goal of a life insurance policy is to provide coverage in the case of a loved one's sudden death. However, if the person dies within a year or two after getting their insurance policy, the case is different. The insurer may seek an explanation for why they should pay the claim. It is more likely in the following scenarios:
● If the information provided on the original application was erroneous; or
● If it seems that the insured may have committed suicide
Do life insurance companies review medical information after a person has passed away?
Yes! The insurance firm will check for any previously hidden medical issues. It will also look into the information provided by the insured in the application for life insurance. If they discover any differences, they will deny your application for death benefits, and you will be out of luck.
The contestability period is defined as the length of time that an insurance company has to analyze and fact-check the facts on a life insurance application before it becomes finalized.
If the insured person passes away within the contestability period, the insurance company will conduct a thorough inquiry. They will look into the individual's medical records as well as all of the other information provided on the application.
A claim will deny or the death benefit will reduce if the insurance company can prove that the medical information on the policy application was not complete or accurate.
They are only going to make a payout if all of the information on the insurance application was entirely and accurately correct.
If there were any misrepresentations or falsifications, the insurance company will void the policy. They will, however, return premiums but will not pay the entire death benefit.
As a result, claims in which the person went away during the contestability period have a substantially greater likelihood of being refused than claims in which the insured passed away after the contestability period has expired.
The duration of the contestability term varies from state to state. However, the majority of states have a two-year contestability period. Despite the fact that it may be annoying for insurance owners and beneficiaries, the contestability period makes logical legal sense.
Consider the following scenario. You have a diagnosis of a terminal illness and decide to purchase a valuable life insurance policy. You do so to make sure that your family gets it in the event of your unavoidable death.
However, on the application, you fail to mention your diagnosis. This will result in the insurance company having no idea of your true health status. They will hold the benefit!
What Happens If the Insurer Discovers a Material Misrepresentation
on the Part of the Policyholder?
It is the insurer's responsibility to pay the death benefits in a timely way. However, it's only possible if no serious deception has been made.
When an insurance company detects substantial deception on an application after a thorough investigation, it has numerous options. It depends on the amount of the death benefit and the seriousness of the misrepresentation. The following are some of the options:
If the deception resulted in a higher premium, the case would go as follows. The insurer would pay the profits less the extra premiums that would have been charged if they had understood the new facts prior to making the claim. This is the method that the insurance company will take if the misrepresentation is modest, such as a concealed check-up.
If the insured knowingly withheld key facts that would have resulted in a rejection of coverage, the insurer would refuse the life insurance claim. They will, however, refund the premiums that the insured had paid for the policy to the policy's beneficiaries.
Examples of misrepresentation and deception
Example of deception would include failing to disclose a chronic sickness, a criminal past, or diagnostic testing that indicated the presence of a dangerous condition.
Before an insurance company may pursue any of these options, several jurisdictions require the firm to demonstrate that the insured submitted erroneous information with the purpose to defraud the company and profit from it.
Instead, if the insurer can demonstrate that the misstatement was substantial, the insurer has the right to refuse the life insurance claim.
If the application requires the applicant to state any diagnosis of an anxiety disorder and the insured failed to mention a childhood diagnosis of OCD, the claim can still be denied.
This is true even if the alleged misrepresentation has little to do with the insured's cause of death.
The Suicide Provision in a Life Insurance Policy
Most life insurance plans have a provision known as a "suicide clause." It allows claims to be refused in the case of the policyholder's suicide. While this may sound gloomy, it is true.
In order to discourage individuals from purchasing life insurance policies with the purpose of committing themselves soon thereafter, therefore leaving significant amounts of money in life insurance payouts for their family members, the suicide clause has been implemented.
Generally speaking, this condition applies throughout the "contestability period." It means that if a policyholder commits suicide more than two years after purchasing a policy, beneficiaries will still get the death benefit.
It is vital to emphasize that AD&D insurance does not cover suicide, which cannot be called an "accident" since it is not an "accident."
If a policyholder dies within a short period of time after purchasing life insurance, the insurance company has more latitude in contesting or denying the beneficiary's claim. If your claim has been wrongfully delayed or refused, it is even more critical that you consult with an expert life insurance beneficiary lawyer as soon as possible.