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Written by: Ryan Albright | Johns Law Group
Most people think the process of making life insurance claim is not complicated …. and often they are correct. However, some life insurance claims are delayed, denied or become contested for several different reasons. When making a life insurance claim, it is important to understand:
1. Was the Policy Issued Recently?
Most states permit a life insurance company to contest the validity of a life insurance policy due to a material misrepresentation in an application for two years after the policy is issued. This contestability period is important if you are a beneficiary to a policy that was issued within two years. In these situations, a life insurer will closely scrutinize the policyholder’s medical history to determine if he or she misrepresented some aspect of their medical history when applying for the policy. If there are misrepresentations in the policy application, the insurer may be inclined to void the policy instead of paying a claim.
2. Impact of Divorce
Divorce often complicates life insurance beneficiary designations. The majority of states have enacted legislation that automatically invalidates a life insurance beneficiary designation in favor of a former spouse unless specific conditions are met. If a person has been divorced, he or she should update beneficiary designations to ensure there is no question about who is the preferred beneficiary. However, if it is too late to change the beneficiary designation, consulting with an experienced life insurance attorney can help you understand your legal recourse. Even in jurisdictions that do not immediately invalidate a beneficiary designation in favor of a former spouse, there are often legal claims that can be asserted by a current spouse or heirs to the policy benefit.
3. Court Orders to Maintain Insurance
Often, when a divorce occurs, the judgment of divorce will include a court order requiring one party to maintain life insurance for either a spouse or children. These court orders may sometimes invalidate or modify beneficiary designations.
4. Challenges to Beneficiary Designations
A life insurance designation can be challenged in a number of ways. The party challenging a beneficiary designation has the burden to establish the designation was not legally proper.
Incapacity: A person can only change a life insurance beneficiary designation if he or she is legally competent to do so. People with advanced dementia, Alzheimer’s, cognitive disorders, or severe health problems are sometimes viewed as not being legally competent to change the beneficiary to a life insurance policy.
Fraud, Duress, or Undue Influence: A beneficiary designation is not effective if it is made without a person’s free will. This may include forging a person’s signature, inducing a beneficiary change through threats, lies, or deceit, or even convincing someone to change a beneficiary designation when a person is mentally or physically frail.
Failure to Comply with Policy Requirements: Many life insurance policies include safeguards aimed at ensuring that a beneficiary designation was actually made by its insured. These requirements may include a wet signature, a notarized signature, and the use of a form required by the insurance company. When a beneficiary change was made without compliance with these formalities, a former beneficiary may challenge the beneficiary change.
CONCLUSION
A life insurance claim is not always clear-cut and many people find themselves in a complex claim process. If your claim has been denied or contested, it is always advisable to speak with a knowledgeable and experienced life insurance attorney.
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