Most people think the process of making a life insurance claim is simple, and often they are correct. However, some life insurance claims are delayed, denied, or contested for several reasons. When making a life insurance claim, it is important to understand:
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1. Was the Policy Issued Recently?
Most states allow life insurance companies to contest the validity of a policy due to a material misrepresentation in an application for two years after issuance. This contestability period is crucial if you are a beneficiary of a policy issued within two years. In these cases, a life insurer will scrutinize the policyholder’s medical history to determine if there were any misrepresentations during the application. If misrepresentations are found, the insurer may void the policy instead of paying the claim.
2. Impact of Divorce
Divorce can complicate life insurance beneficiary designations. Many states have laws that automatically invalidate a beneficiary designation in favor of a former spouse unless specific conditions are met. If a person has been divorced, they should update their beneficiary designations to avoid any disputes. If it is too late to change the beneficiary designation, consulting with an experienced life insurance attorney can help understand legal options. Even in states that do not automatically invalidate a beneficiary designation for a former spouse, current spouses or heirs can often assert legal claims to the policy benefit.
3. Court Orders to Maintain Insurance
Divorce judgments often include court orders requiring one party to maintain life insurance for a spouse or children. These court orders may invalidate or modify beneficiary designations.
4. Challenges to Beneficiary Designations
A life insurance designation can be challenged in several ways. The challenging party must prove the designation was not legally proper.
- Incapacity: Only legally competent individuals can change a life insurance beneficiary designation. People with advanced dementia, Alzheimer’s, cognitive disorders, or severe health problems may not be considered legally competent to make these changes.
- Fraud, Duress, or Undue Influence: A beneficiary designation is invalid if made without the policyholder’s free will. This includes forging a signature, inducing a beneficiary change through threats or deceit, or convincing someone to change a beneficiary designation when they are mentally or physically frail.
- Failure to Comply with Policy Requirements: Many life insurance policies have safeguards to ensure a beneficiary designation is made by the insured. These may include a wet signature, a notarized signature, and the use of a specific form required by the insurance company. If a beneficiary change does not comply with these formalities, it can be challenged by a former beneficiary.
Conclusion
A life insurance claim is not always straightforward, and many people encounter a complex claim process. If your claim has been denied or contested, it is advisable to consult with a knowledgeable and experienced life insurance attorney.
Alicia Adamczyk is a New York City-based senior writer at Zobuz, covering money and careers. Prior to her role at Zobuz, Alicia worked as a senior money reporter at CNBC, and she held reporting roles at British Magazine and Lifehacker. She is a graduate of the University of Michigan.
