What to Do If a Life Insurance Claim Is Denied

Facing the denial of a life insurance claim can be a distressing experience, casting uncertainty over financial security during already challenging times.

In this blog post, our life insurance lawyers explore common reasons for denials and provide actionable steps for policyholders and beneficiaries to navigate this situation in Texas.

Key Takeaways

• Many denied life insurance claims can be successfully overturned with skilled legal representation.
• Material misrepresentation during the contestability period (first two years) is the most common reason for claim denials.
• Depending upon what the insurance policy states, you may have up to 180 days from the date of denial to file a formal appeal with your insurance company. However, this should be confirmed by consulting with a knowledgeable attorney.
• Texas Insurance Code Section 541.060 protects you from bad faith tactics by insurance companies.
• Thorough documentation of all communications with your insurer matters for building a strong appeal.

Common Reasons Life Insurance Claims Are Denied

Under Texas Insurance Code Chapter 541, insurers must provide specific reasons for denials, and many of these reasons can be challenged. Here are the most common reasons why life insurance claims are denied in Texas:

1. Application Misrepresentation and Contestability Issues

Failure to disclose pre-existing medical conditions or lifestyle habits on the life insurance application can invalidate the life insurance policy. Transparency and honesty are paramount to ensure policy validity and secure life insurance benefits for beneficiaries.

2. Policy Lapse Due to Unpaid Premiums

If a policyholder fails to pay premiums on time and the policy lapses, coverage may be terminated, leading to a denial of any subsequent claims. In Texas, insurers must provide a 30-day grace period for premium payments and send written notice before canceling a policy for non-payment. Stay up-to-date with premium payments to keep coverage active and ensure the death benefit payout remains available.

3. Policy Exclusions and Death Exclusions

If the cause of death falls within these death exclusions, a life insurance company may deny the claim. Common policy exclusions include:

• Death from illegal or criminal activities
• Death during risky hobbies or extreme sports
• Suicide clause (typically applies during the first two years)
• Death while participating in risky behaviors

4. Bad Faith Tactics and Improper Investigations

Unjustified delays, inadequate investigations, or wrongful interpretation of policy terms refer to bad faith tactics. When insurers act in these ways, they fail to fulfill their contractual obligations to policyholders and beneficiaries. Recognizing signs of bad faith and seeking legal assistance can help challenge wrongful denials.

5. Insufficient Documentation and Investigation Concerns

Life insurance companies thoroughly scrutinize claims to detect any signs of fraudulent activity. If discrepancies or irregularities are found in the claim, the insurer may initiate an investigation, which could delay processing or potentially result in the claim being denied altogether.

6. Failure to Comply with Texas-Specific Requirements

Life insurance claims can be denied if they do not adhere to the policy's terms and conditions or if the insurer fails to follow Texas Department of Insurance regulations. Failing to meet these requirements, such as by submitting a claim beyond the policy's expiration date or exceeding coverage limits, can result in denial.

Steps to Take If Your Life Insurance Claim Is Denied

By following these Texas-specific steps and understanding your legal rights, you can significantly improve your chances of overturning the denial and securing the benefits you deserve.

Comprehensive Claim Analysis

Carefully review the denial letter provided by the life insurance company. It should outline the reasons for the denial and any specific policy provisions or evidence cited to support the decision.

Evidence-Based Response Strategy

Make sure you understand why your claim was denied. Document every interaction with the insurance company, including phone calls, emails, and letters. This documentation can be crucial if you need to prove bad faith conduct later.

Document Collection and Preservation

Collect all relevant documentation related to the claim, including the life insurance policy, insurance application, medical records, and any correspondence with the life insurance company. Additionally, gather supporting evidence such as:

• Complete medical records from all healthcare providers
• Medical history documentation
• Employment records and financial statements
• Death certificate
• Witness statements if applicable
• Medical opinions if the denial involves the policyholder's health

Having thorough documentation will be essential if you decide to appeal the denial and seek the death benefit payout.

Legal Consultation and Representation

Consider seeking advice from a qualified attorney who works in insurance law. They can review your case, guide your options, and represent your interests if you decide to pursue further action, such as filing a formal appeal or initiating legal proceedings.

Strategic Appeal Process

If you believe the denial was made in error or if you have additional evidence to support your claim, you can file a formal appeal with the insurance company. Follow the instructions outlined in the denial letter for filing an appeal, and submit any additional documentation or information that may support your case.

Texas Life Insurance Claim Appeal Rights and Timelines

In Texas, life insurance companies are required to furnish policyholders with a written explanation for any denied insurance claim, along with a designated time frame for filing an appeal. Typically, policyholders have 60 days or up to 180 days from the date of the denial to initiate the appeals process with the insurer.

If the appeal is unsuccessful, policyholders may opt to lodge a complaint with the state's department of insurance or get a consultation from life insurance lawyers. Texas has some of the strongest consumer protection laws in the nation for insurance disputes.

How Do You Avoid a Life Insurance Claim Denial?

If you have purchased a life insurance policy, there are a few things you can do to prevent claim denials and safeguard your loved ones' financial security:

• Provide accurate information: Ensure all details provided to the insurer are truthful and complete.
• Understand policy terms: Familiarize yourself with the terms, coverage limits, and exclusions of your policy.
• Pay premiums promptly: Avoid policy lapses by paying premiums on time according to the agreed schedule.
• Update policy as needed: Review and update your policy to reflect any changes in circumstances or beneficiaries.
• Disclose changes in health: Inform your insurer about any changes in health conditions or medical treatments.
• Avoid risky behaviors: Minimize engaging in activities that could void coverage, such as extreme sports or illegal actions.
• Keep beneficiaries informed: Make sure beneficiaries are aware of the policy and how to file a claim.
• Maintain detailed records: Keep thorough documentation of policy information, payments, and communications with the insurer.

Unfortunately, simply purchasing a life insurance policy is not enough to make sure your beneficiaries receive payment in the event of your death. Take steps to make benefits accessible and less likely to be withheld by the insurance company.

How Our Texas Life Insurance Lawyers Can Protect Your Rights

At Omar Ochoa Law Firm, our team is dedicated to providing personalized service to every one of our clients. We see you as the individuals you are, not case numbers. We can help you by offering:

• Thorough claim analysis: Have your denied claim carefully reviewed to identify potential grounds for appeal or legal action. We analyze why the insurer denies claims and develop strategies to counter their arguments.
• Skilled negotiation: Use the lawyer's negotiation skills to advocate for fair settlements with insurance companies. Our goal is to secure the full death benefit payout your family deserves.
• Texas law compliance: Ensure compliance with Texas insurance laws and regulations throughout the claims process. We understand how life insurance payouts work under Texas law.
• Dedicated representation: Receive dedicated representation in legal proceedings or dispute resolution, safeguarding your rights and interests effectively. We handle cases on a contingency fee basis, meaning you don't pay unless we win. We fight for surviving family members who need financial support.
• Bad faith claims knowledge: If your insurer has acted in bad faith, we can pursue additional damages beyond the policy benefits, including attorneys' fees and punitive damages, as permitted under Texas law. We know when life insurance companies cross the line.

We understand that when a policyholder passes away, their family needs the life insurance benefits to provide financial support during difficult times.

The Sooner You Act, the Stronger Your Position Becomes

Don't let an insurance company's denial be the final word on your life insurance benefits. With the aggressive legal representation and a deep command of Texas insurance law, many denied claims can be successfully overturned. Contact us today for a consultation and take the first step toward resolution.