Our life insurance lawyers in Tennessee handle delayed and denied life insurance claims, AD&D claims, beneficiary disputes and Tennessee interpleader lawsuits.
A life insurance claim can be denied due to a period of non-coverage resulting from missed premium payments. Insurance policies require regular premium payments to remain in force, and if these payments are not made, the policy can lapse or be terminated, leading to a denial of any claims. Here are several ways this can happen:
Policy Lapse: If the policyholder fails to make premium payments as scheduled, the insurance policy may lapse. A lapse means that the policy is no longer in effect, and there is no coverage. If the insured person passes away during the period when the policy is lapsed due to missed payments, the claim may be denied because the policy was not in force at the time of death.
Grace Period Expiry: Many insurance policies include a grace period, typically 30 days, during which the policy remains in force even if the premium payment is missed. However, if the premium is not paid within the grace period, the policy can still lapse, and coverage will cease. Claims filed after the grace period has expired may be denied.
Reinstatement Denial: Some policies allow policyholders to reinstate their coverage after a lapse by paying the missed premiums, interest, and potentially undergoing medical underwriting. However, the insurance company may deny the reinstatement request if the policyholder’s health has deteriorated significantly during the lapse, making them uninsurable.
Policy Termination: In some cases, the insurance company may terminate the policy due to non-payment of premiums, and reinstatement may not be an option. Once a policy is terminated, it cannot be revived, and any claims made after termination will be denied.
Auto-Debit Failures: If the policyholder has set up automatic premium payments through a bank account or credit card, a change in payment information, insufficient funds, or any issue preventing the automatic deduction can result in missed payments and policy lapses.
Missed Premiums During the Contestability Period: During the initial contestability period (usually the first two years of the policy), the insurance company may thoroughly investigate any claims and may also review premium payment records. If they discover a pattern of missed premium payments or non-disclosure of such lapses during this period, it may raise concerns about the applicant’s honesty, potentially leading to a denial of the claim.
To avoid these issues, policyholders should ensure that premium payments are made on time and consistently. Setting up automatic payments or reminders can help prevent lapses. Additionally, it’s essential to understand the terms and conditions of the policy, including any grace periods and reinstatement provisions, to make informed decisions regarding missed payments and policy lapse. If a policy has lapsed, it may still be possible to reinstate it by catching up on missed payments and fulfilling any other requirements specified by the insurance company, but this should be done promptly to maintain coverage.