The No. 1 reason that life insurance companies deny claims is a denial for material misrepresentation. This means the insured has purposefully concealed, falsified or left out relevant facts critical to the proper issuance of an insurance policy. He or she failed to disclose information on the application that is required for the insurer to know in order to determine insurability and to assess risk.
For example, suppose you are a smoker, and you conceal that fact on the application, just to qualify for coverage you would otherwise not be entitled to. If you were to die of lung cancer within the two-year period of contestability under your policy, the insurer is able to investigate the claim and the policy itself to see if they can find reason to deny the claim, or reduce the benefit amount.
Marc Whitehead & Associates is often able to fight this method of claim denial, as many misrepresentations are in truth not material, but instead are unfounded or unrelated allegations, or unintentional omissions. This type of error or omission is not grounds for denial by an insurance company.
When Insurers Abuse Material Misrepresentation to Deny Claims
The insurer aims to reveal material misrepresentations by investigating the applicant’s medical history, current health, age, finances, tobacco and alcohol use and other lifestyle preferences, and high risk hobbies or occupation, such as sky diving, car racing or heavy equipment operations. Even mistakes as simple as missing information have been used as grounds for denial.
As a beneficiary, if your claim is denied you have the right to scrutinize the insurance company’s investigation and to appeal the denial, either through the formal appeals process or in litigation.
Many cases of alleged material misrepresentation are unfounded allegations made to sound formally legitimate, placing blame and accusations of fraud on the insured. A good attorney will see through the false allegations and take the proper legal steps to overturn the denial or reinstate full payment of benefits.
In other cases, life insurance companies may use the two year period of contestability as a way to create a trap for insureds and beneficiaries. Insurers will hurry applications through the underwriting process and issue coverage without properly screening for risks. If the policyholder dies during the contestability period, the insurer can capitalize on faults in the application—and a claim for death benefits is an easy target for a denial for material misrepresentation.