Our life insurance lawyers in Connecticut handle delayed and denied life insurance claims, AD&D claims, beneficiary disputes and Connecticut interpleader lawsuits.
A life insurance claim may be denied due to lapse when the policyholder’s coverage has terminated because they failed to pay premiums or meet other policy requirements. Here are various scenarios in which a life insurance claim may be denied due to policy lapse:
Non-Payment of Premiums: The most common reason for a policy lapse is the failure to pay premiums on time. If the policyholder misses premium payments and the policy’s grace period (usually 30 days) expires without payment, the policy may lapse, and any subsequent claims may be denied. Grace Period Expiry: Most life insurance policies provide a grace period during which the policyholder can make overdue premium payments to reinstate the policy without a lapse. However, if the policyholder does not pay the overdue premiums within the grace period, the policy can still lapse, and claims may be denied.
Premium Mode Change Without Proper Adjustment: If the policyholder changes the premium payment mode (e.g., from annual to monthly) but does not adjust the payment amount accordingly, they may inadvertently miss premium payments, leading to a lapse. Loan Repayment Default: Some permanent life insurance policies allow policyholders to take out loans against the policy’s cash value. If the policyholder fails to repay the loan according to the policy terms and interest accrues, it can erode the cash value and cause the policy to lapse.
Exhaustion of Cash Value: Certain types of life insurance, like universal life insurance, depend on the cash value to cover the cost of insurance. If the cash value is insufficient to cover the monthly deductions for the cost of insurance, the policy may lapse. Fraud or Misrepresentation: If the policyholder provided false information or made material misrepresentations on the insurance application, and the insurer discovers this during the claims process, the claim may be denied due to policy fraud.
Suicide Exclusion: Many life insurance policies have a suicide exclusion clause that states that the death benefit will not be paid if the insured dies by suicide within a specified period after the policy’s issuance (typically two years). If a suicide occurs within this period, the claim may be denied.
Contestability Period: Most life insurance policies have a contestability period (usually two years from the policy’s issuance) during which the insurer can investigate and potentially deny a claim for material misstatements or omissions on the application.
Policy Forfeiture: In some cases, the policyholder may voluntarily surrender or forfeit the policy due to non-payment or other reasons. Once the policy is forfeited, the death benefit is no longer payable.
Our life insurance lawyers handle all denied life insurance claims. Call us for a free consultation.