Life Insurance

What happens if the insured person dies?

Once proof of the death is submitted to the insurance company, and it isclear that the necessary premiums to keep the policy "in force" werepaid to the date of death, the life insurance company should promptly pay thebenefits, assuming that everything is in order and the policy has been ineffect for at least two years. (Once the policy is at least two years old it isbeyond the "incontestable period" and must be paid, except inextraordinary circumstances.)

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

Typically the beneficiary -- the person who is entitled to receive the benefits-- provides the insurance company with the "proof" of the deathrequired by the policy. A certified copy of the death certificate (typicallywith a "raised seal" from the County Clerk'sOffice) and the life insurer's claim form are normally sufficient, but it isnecessary to file them; just because the company may have been able to readabout the death in the papers, or also was the health insurer, is notsufficient.

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

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

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

Policies usually require an insured to give "prompt notice" of anyloss, including basic information about what property was damaged or the timeand place of an accident or injury. If there has been property damage, theinsured will be obligated to take reasonable steps to protect the property fromfurther damage. If there is a theft loss, policies often require that thepolice must be notified. In the event of a liability claim, you must promptlysend the insurance company copies of any notices or other legal papers youreceive. For a claim under a life insurance policy, you may be required toprovide a copy of the death certificate for the insured person. Almost allproperty and liability policies contain a general requirement that the insuredmust cooperate with the insurance company in the investigation, settlement ordefense 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 (orthe estate is subject to Federal Estate Tax in which case it may be wise to asktax counsel if a "disclaimer" might help reduce estate taxes beforefiling 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" programnow used to pay larger sums of benefits by most life insurers in the UnitedStates (the concept was invented by the Chairman of in 1983) orin a single check -- you may want to ask an attorney to find a neutralfinancial planner who could honestly explain some of the valuable settlementoptions 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 agentsand brokers do not like people to consider them), and in some states alsoprotect the proceeds from possible claims of creditors.

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

Yes. Apart from fraud in the inception of the policy, or fraud bysubstitution, the most common ground life insurers use to deny a claim is thatthere was a "material misrepresentation" in connection with theinsurance.

The material misrepresentation may occur in the original application for theinsurance or in an amendment to the application or in an application forreinstatement for Individual or Group Life cases, or in an application for lateenrollment in a Group case.

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

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

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