Life Insurance

What happens if the insured person dies?

Once proof of the death is submitted to the insurance company, and it is clear that the necessary premiums to keep the policy "in force" were paid to the date of death, the life insurance company should promptly pay the benefits, assuming that everything is in order and the policy has been in effect for at least two years. (Once the policy is at least two years old it is beyond the "incontestable period" and must be paid, except in extraordinary circumstances.)

Even if premiums on the policy were not currently being paid, the policy may have been in a "paid up" status, and thus remained in force, or the company may have failed to send the necessary notices of cancellation, or be able to prove it had sent such notices, in which case it may be possible to recover on the policy.

Typically the beneficiary -- the person who is entitled to receive the benefits -- provides the insurance company with the "proof" of the death required by the policy. A certified copy of the death certificate (typically with a "raised seal" from the County Clerk's Office) and the life insurer's claim form are normally sufficient, but it is necessary to file them; just because the company may have been able to read about the death in the papers, or also was the health insurer, is not sufficient.

Processing a policy death claim should take only one to four weeks from the time the insurer's claims office has all the needed paperwork in the standard case, if it does not, you may have a problem case or an insurer acting in bad faith.

What am I required to do when I have a claim?

Every insurance policy specifies certain duties that an insured must perform after a loss has occurred. The exact duties vary among different policies and will be different for property damage claims than for liability claims. These duties are usually included in the section of the insurance policy entitled "Conditions," since failure by the insured to perform one or more of these duties could relieve the insurance company of its obligation to pay the claim -- i.e., the insured's duties are a contractual "condition" of the insurance company's obligation to perform its duties under the policy.

Policies usually require an insured to give "prompt notice" of any loss, including basic information about what property was damaged or the time and place of an accident or injury. If there has been property damage, the insured will be obligated to take reasonable steps to protect the property from further damage. If there is a theft loss, policies often require that the police must be notified. In the event of a liability claim, you must promptly send the insurance company copies of any notices or other legal papers you receive. For a claim under a life insurance policy, you may be required to provide a copy of the death certificate for the insured person. Almost all property and liability policies contain a general requirement that the insured must cooperate with the insurance company in the investigation, settlement or defense of the claim.

Do I need a lawyer to help me file a death claim?

Usually not, unless it falls into one of the circumstances outlined below. However, if you think there may be a problem, or the policy is very large (or the estate is subject to Federal Estate Tax in which case it may be wise to ask tax counsel if a "disclaimer" might help reduce estate taxes before filing the claim) consulting a lawyer who knows insurance law would be wise.

Also, instead of taking large amounts of proceeds in a "lump sum" -- whether through the insurer's "checkbook instead of a check" program now used to pay larger sums of benefits by most life insurers in the United States (the concept was invented by the Chairman of in 1983) or in a single check -- you may want to ask an attorney to find a neutral financial planner who could honestly explain some of the valuable settlement options that may be available to you as a beneficiary.

The checkbook instead of a check programs (and other settlement options) usually pay higher rates, with no commissions or fees (which is why some agents and brokers do not like people to consider them), and in some states also protect the proceeds from possible claims of creditors.

Can a life insurance company deny a claim on a valid policy if the insured dies?

Yes. Apart from fraud in the inception of the policy, or fraud by substitution, the most common ground life insurers use to deny claims is that there was a "material misrepresentation" in connection with the insurance.

The material misrepresentation may occur in the original application for the insurance or in an amendment to the application or in an application for reinstatement for Individual or Group Life cases, or in an application for late enrollment in a Group case.

A material misrepresentation sufficient to deny a claim can not be just any misstatement. (For example, if you said you had green eyes but the company would say they are hazel, that would NOT be material.) Under many states' laws, a material misstatement is one that if fully and truthfully disclosed would have led to a refusal by the insurer to issue the policy, at least on the terms and conditions it issued the policy.

While a material misrepresentation can be made about almost anything the application seeks to uncover, such as the applicant's occupation, employment history, age, income, other insurance in force, prior applications for insurance, insurance claims made, cigarette smoking or tobacco usage (and other slow suicide attempts), driving record or tickets, drinking, hobbies, piloting or flying in non-commercial aircraft, etc, the most commonly charged misrepresentations involve an applicant's state of health and medical history.