Why a Life Insurance Payout Can Be Denied in Illinois

When someone dies, their loved ones often have to deal with a difficult process that requires them to file a life insurance claim. Unfortunately, life insurance payouts are not always a guarantee. In fact, there are many legitimate reasons for a life insurance claim to be denied.



A claim denial is among the most frustrating things that can happen to a grieving family. After all, they already have to cope with the loss of a loved one. So if you want to take on a life insurance policy, you need to know what could cause your loved ones not to receive the payout they deserve after your death.

Your Death Was Caused by Something That the Policy Excludes

When you purchase life insurance, your insurer typically asks you to disclose any risky activities you participate in as well as any pre-existing medical conditions you have. They use this information to determine how much they should charge as premiums.

Your insurer also sets a limit to exclude certain things that might result in your death. For example, if you die while you participate in an extreme sport like skydiving, your life insurance policy may exclude coverage for that death. Similarly, if you have a heart condition that your insurer excludes from your life insurance policy and you die of a heart attack, your insurer may deny the life insurance claim.

In addition, if you have a pre-existing condition like cancer, your life insurance policy may exclude coverage for death due to that condition.

Make sure to read the fine print of your life insurance policy carefully to know what your policy does and doesn't cover. If you're uncertain about anything, don't hesitate to ask your life insurance agent for clarification.

You Withheld Information During the Application

When you apply for life insurance, your insurance company will ask you a series of questions about your health and lifestyle. You need to disclose any and all information that could potentially impact the insurance company's decision to provide coverage.

Your insurer may ask for information about your health, family medical history, job, and hobbies. You need to be as truthful as possible during the application stage. If you lie and your life insurance provider finds out, they may void your policy entirely.

For example, if you fail to disclose a history of heart disease, the insurer can later argue that the policy should be void because you knew about a pre-existing condition and didn't tell them. Similarly, if you don't disclose that you're a smoker and you later die of smoke-related lung cancer, your insurance company may also deny your claim.

In other cases, policyholders simply forget to update their insurer about a change in their health status. This mistake can cost you a lot in the long run.

For example, if you get a cancer diagnosis after you purchase a life insurance policy, you'll need to inform your life insurance company about this new development. If you don't and later die of cancer, your life insurance company may deny the claim on the grounds that you failed to disclose a material change in your health status.

In short, you have to be thorough and truthful when you apply for life insurance. You're much better off if you provide too much information than not enough. Otherwise, your family might be denied financial support from your life insurance policy after your death.

You Missed Premium Payments

For your life insurance policy to remain active, you need to keep up with premium payments. If you miss a payment, the life insurance policy may lapse. A lapsed policy occurs when an insurance company terminates a policy because of the policyholder's failure to pay their premiums.

If you die after your life insurance policy lapses, your beneficiaries won't receive the insurance payout. Therefore, make sure you keep up with your premium payments. You can even set up automatic payments to avoid missed payments.

If you miss a payment, contact your life insurance company as soon as possible to make arrangements. Some insurers might be willing to reinstate your policy if you missed a payment due to financial hardship or another extenuating circumstance. They can also help you set up a payment plan so you can easily catch up on your premiums.

But if you let your policy lapse for too long, you might not be able to reinstate it. In that case, you'll have to apply for a new life insurance policy, which can be even more expensive than your old one. So if you want to keep your life insurance policy in force, make sure to pay your premiums on time.

Now that you know the main reasons why a life insurance payout can be denied, you can take steps to avoid them. Contact Illinois Insurance Center if you have any questions or need help with the right life insurance policy.