Life insurance is an investment in the security of your closest loved ones. You pay for a policy so that they can afford a funeral for you and so that they can maintain the same standard of living when you no longer contribute to the family.
There are different kinds of life insurance available, and coverage varies depending on family obligations and income levels. Some adults buy their own policies, while others have affordable options offered through their employer.
Most people can expect their life insurance policy to protect loved ones after they die. When might a life insurance policy refuse to pay a claim filed by your surviving family members?
When you missed premium payments
One of the more common and devastating reasons that family members lose life insurance coverage is that someone failed to make payments on the policy. If you become hospitalized or incapacitated, you could miss a bill or forget to send a check. Someone whose premium payments are not up-to-date could die and leave their family members without coverage.
When your loved one recently purchased the policy
Whether your family member just increased their amount of coverage or switched to a different company, there is usually a waiting period before the policy will take effect. It is common for new policyholders not to have coverage for anywhere from 30 to 90 days after they first make a payment and sign their policy paperwork. This waiting period prevents people who know they are about to die from making false statements and taking advantage of insurance companies.
When there is a death by suicide
Contrary to popular beliefs, life insurance companies can’t simply refuse to cover any and all deaths by suicide. However, it is common for companies to enact much more strict limitations on a claim related to suicide. For example, they may not pay out any claims made within the first year or two after someone buys a policy. There will usually be a clause specifically discussing the waiting period for suicide-related claims and the coverage available.
Reviewing the life insurance policy held by your loved one can help you determine if a denied claim may be a violation of your rights.