No rule says someone can’t have more than one life insurance policy from different companies – and there are good reasons people often do. Multiple life insurance policies can help with proper estate planning, navigate coverage gaps and help people meet specific financial objectives for their dependant loved ones.
However, while multiple life insurance policies allow you a versatile approach to your coverage needs, the claims process can be complicated. Here are some of the reasons multiple policies might increase the risk of a denied claim:
Failure to disclose existing policies
If the insured failed to disclose existing life insurance policies when applying for a new one, it could be considered misrepresentation. Insurers rely on accurate information to assess risk and determine premiums. If they discover undisclosed policies during the claims process, they may deny the claim for non-disclosure.
Policy exclusions or limitations
Each life insurance policy comes with its own terms, conditions, exclusions and limitations. If a claim falls within an exclusion or limitation in one policy but not in another, there could be disagreements or disputes between insurers regarding which policy is responsible for the claim.
Coordination issues
Coordinating multiple policies to ensure seamless claims processing can be challenging, especially if the policies have different beneficiaries, payout structures or terms. The failure to properly coordinate the policies could result in delays or complications during the claims process that could prove burdensome to the beneficiaries.
Material misrepresentations
If the insured individual provides false or misleading information during the application process for any of the policies, it could lead to a denial of the claim. Material misrepresentations include things such as concealing pre-existing medical conditions or engaging in risky activities specifically prohibited by a policy’s terms.
Most life insurance policies have a contestability period, typically the first two years after the policy’s issuance, during which the insurer has the right to contest the validity of the policy based on misrepresentation or fraud. If discrepancies or misrepresentations are discovered during this period, the insurer may deny the claim. If you believe that a life insurance policy claim was unfairly denied, it’s wise to seek experienced legal representation right away.
