9 Ways Life Insurance Will Not Pay Out
Last updated: March 28th, 2023
Reviewed by
Grant Desselle
Licensed Insurance Agent
Table of Contents
1. Suicide
A common circumstance in which a life insurance policy will not pay out is in the case of suicide. Depending on what state you live in, there could be a suicide clause in your policy. If there is such a clause, and if you were to commit suicide within the specified time frame, your beneficiary would only get the premiums back, not the death benefit.
This suicide clause is an incontestability clause, a window of time during which the insurance company can investigate and deny claims. The period is usually one to two years in most states, and it begins as soon as the insurance policy goes into effect.
The clause protects life insurance companies from people who would take out a large policy and then commit suicide for the “betterment” of their family’s financial situation. The thought of doing something like that might seem bizarre to most people, but before the incontestability “suicide clause” went into effect it occurred more often than you might think.
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2. Withholding Information On The Application
The insurance company is going to investigate the cause of your death when a claim arises within the first 2 years of the date of issue. You can be sure of that. The first 2 years are called the contestability period.
It will look at the events that led to your death and compare them against your original application. If the company finds that you were less than forthright, or if you somehow forgot to mention that you have a health condition or you were involved in dangerous activities all the way back to the time you applied for coverage and you didn’t mention them, it can deny payment on the claim.
In order for a life insurance company to deny a claim, the misrepresented information must be considered “material”.
Information is a “material representation” if it would have caused the insurer to change the terms of the policy with different premiums, or have been unwilling to issue it in the first place.
If an investigation finds you misrepresented facts on your application, the insurer has a couple of options.
- It can figure out how much premium you should have been paying based on the new facts and reduce the death benefit by that amount.
- Or the insurance company can deny the claim.
How the situation is handled depends on the state laws, the size of the claim, and the severity of the misrepresentation.
Each state has its own laws about the incontestability clause, so a claim could be denied due to a material misrepresentation whether there was intent to deceive or not. In most states, a policy can be voided even if the material misrepresentation has no connection with the cause of death.
In Nationwide v. Nelson, the insured had been convicted of a felony but answered the question on the application that he had not. The defendant insisted that it was not a deliberate attempt to mislead the insurer, but the court ruled that intentional misrepresentation is not required to void the policy.
In Meadlock v. American Family Life Assurance Company of Columbus, the insured failed to disclose heart issues on the application and subsequently died of ventricular fibrillation. The insurer refused to pay, citing material misrepresentations.
3. Dangerous Activities
You may have heard of professional athletes having a certain clause in their contract that does not allow them to participate in what are considered dangerous activities. That could be something fairly obvious, like skydiving, or even something far more common, such as riding a motorcycle.
The same applies to a life insurance policy. Think about it. Life insurance is all about risk management. If you are jumping out of an airplane with a parachute (that may or may not work) on your back, you’re a higher-risk applicant than someone who doesn’t engage in that kind of activity. It’s best to be honest about your risky hobbies or lifestyle when asked. If you are actively involved in one of the dangerous activities listed on the application, you can still do it, but you will need to pay to be protected.
4. Illegal Activities
This goes back to that earlier statement about common sense. If you die while committing a crime or participating in an illegal activity, the life insurance company can refuse to make a payment. For example, if you are killed while stealing a car, your beneficiary won’t be paid.
Okay. That one’s fairly obvious. But this next point might surprise you. What if you’re doing something illegal and you don’t even realize it? Maybe you’re walking on private property. Trespassing is a crime — even if you don’t know you’re trespassing. Let’s say you’re being chased by a big dog, and you have a heart attack and die. If it turns out that you were trespassing, your claim could be denied.
5. Act of War
Some life insurance policies have an Act of War exclusion. It’s not designed to exclude soldiers. Rather, it’s in place to deny claims for civilians who are killed in wars or by acts of war, such as journalists whose job takes them into the midst of battle on a regular basis, or people who travel to regions of the world where there’s armed conflict.
6. Living Outside of the United States
Here’s one you may not have considered. Let’s say you take out a life insurance policy while you’re living in the United States, and then you move to another country.
There could be a clause in the policy that excludes the payment of a death benefit if you are not living in the U.S. at the time of your death. Be sure to look for any mention of this in your contract, especially if you see yourself leaving the U.S. in the near future.
7. Fraud
When a death claim occurs after the 2 year contestability period, the insurance company must prove fraud to deny a claim.
Insurance fraud is a “specific” intent crime. This means the prosecutor must prove that the person involved knowingly committed an act to defraud.
Life insurance is a type of contract, and with all contracts, fraud can void the entire agreement.
If you provide material misrepresentations with the intent to defraud or to facilitate fraud, you may also be guilty of insurance fraud, which is a crime.
8. No Insurable Interest
In the field of personal insurance, one is held to have an unlimited interest in one’s own life. “Insurable interest” must exist at the time of the contract. Continued insurable interest, however, need not be demonstrated. A divorced woman may continue life insurance on the life of her former husband and legitimately collect the proceeds upon his death even though she is no longer his wife.
For someone to purchase an insurance policy on your life and be considered the beneficiary (making them beneficiary-owner), they must be able to demonstrate an insurable interest. Do note that even with an insurable interest, anyone who wants to insure your life would also require your consent before a policy could be issued. There are some exceptions, such as a parent buying coverage for a minor child.
Insurable interest examples:
1. In the case of individuals related closely by blood or by law, a substantial interest is engendered by love and affection.
2. In the case of other persons, a lawful and substantial economic interest in having the life, health or bodily safety of the individual insured continue, as distinguished from an interest which would arise only by, or would be enhanced in value by, the death, disablement or injury of the individual insured.
3. An individual party to a contract or option for the purchase or sale of an interest in a business partnership or firm, or of shares of stock of a closed corporation or of an interest in the shares, has an insurable interest in the life of each individual party to the contract and for the purposes of the contract only, in addition to any insurable interest which may otherwise exist as to the life of the individual.
4. A charitable organization as provided in section 501(c)(3) of the internal revenue code, which has a policy ownership interest has an insurable interest in the life of each proposed insured who joins with the charitable organization in applying for a life insurance policy naming the charitable organization as owner and irrevocable beneficiary.
If a life insurance policy lacks an insurable interest at inception, it is voidable It, therefore, follows that if no insurance policy ever legally came into effect, then neither did any of its provisions, including the statutorily required incontestability clause. The incontestable clause is no less a part of the contract than any other provision of it. As a result, the incontestability provision does not bar an insurer from asserting a claim on the basis of a lack of insurable interest after the incontestability period expires.2
9. Policy Replacement
If you do replace existing coverage, the new policy may contain new suicide and contestable periods. The following would be considered replacement: you stop paying premiums on an existing policy or surrender an existing policy before or shortly after applying to us or you borrow from an existing policy to pay premiums for the insurance for which you are applying. State law may define replacement to include other situations.
Read the fine print and get insured with confidence
By no means is this a comprehensive list of reasons life insurance won’t pay. These are, however, some of the more common instances.
Bottom line? Be completely honest, and don’t ignore the fine print on your life insurance policy. You don’t want to be responsible for losing the benefits of that policy because you “didn’t know” or because you thought you could get away with something by not being 100% truthful. The best advice is to be sure to read your entire insurance contract — including and especially the fine print — before you sign it.
If you’re unsure of anything, just ask. That’s what our claims specialist is for, to guide and direct you to the insurance policy that’s best for you. They will read the fine print with you and help you understand what it all means, especially as it pertains to your particular situation.
To talk with our experienced Life Insurance Lawyer, contact our preferred life insurance claims specialist.
Have Questions?
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FAQ’s
Reasons life insurance won’t payout?
- Suicide
- Smoking, or another health-related issue
- Dangerous activities
- Illegal activities
- Act of war
- Living outside of the United States
- Fraud
- No Insurable Interest
- Replacement
Does life insurance pay for suicidal death?
Depending on what state you live in, there could be a suicide clause in your policy. If there is such a clause, and if you were to commit suicide within the specified time frame, your beneficiary would only get the premiums back, not the death benefit.
This suicide clause is an incontestability clause, a window of time during which the insurance company can investigate and deny claims. The period is usually one to two years in most states, and it begins as soon as the insurance policy goes into effect.
How long do you have to have life insurance before you die?
It depends. If it is a term, universal or whole life policy it is same-day coverage once it is in force. If it is a guaranteed issue policy, it can be up to 2 years.
References
- http://www.insurance.ca.gov/01-consumers/105-type/95-guides/15-gen/insur-fraud-is-felony.cfm
- https://www.opic.texas.gov/life-insurance/rights/
- https://content.naic.org/sites/default/files/inline-files/JIR-ZA-34-03-EL.pdf
- https://www.supremecourt.gov/DocketPDF/18/18-7709/86616/20190205152949620_00000012.pdf
- https://courts.delaware.gov/opinions/download.aspx?ID=160700
- https://casetext.com/case/meadlock-v-am-family-life-assurance-co-of-columbus
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Brian is the founder and CEO of Insurist and carries Life, Health, and Property & Casualty licenses in all 50 U.S. states. Since 2013, Brian has been a member of Million Dollar Round Table, a designation for the top 1% of financial advisors worldwide. Brian has been featured in Yahoo! Finance, Money.com, Entrepreneur.com, Life Happens, Forbes, MSN, and Good Financial Cents. Brian’s goal is to show customers the best products, the quickest answers to their questions, and provide expert advice.
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Grant's past experience includes work as a licensed sales agent for Hagerty Insurance. He has reviewed thousands of existing auto policies across the nation and issued hundreds of new ones on everything ranging from classic cars undergoing restoration to modern exotics and motorcycles.
Hi Luke,
I am a prospective kidney donor (I have been cleared to donate my kidney to a friend but the date has not been finalized) that would like to get life insurance, per my wife’s request BEFORE surgery. The date could be in 2 months, or 2 years, depending on my friend’s condition. So, will this scenario affect my policy premium for term/whole life insurance? Do I have to disclose this information even though it has not happened yet and there is a possibility it may not happen for year(s)? If I do not disclose, will my policy payout be denied in 10 years if I die from causes not related to the donation?
Please help!
John
Hi John,
This is where you start getting into a very grey area when it comes to overall ethics.
Most companies will ask if you have any surgeries planned or scheduled when you are applying for life insurance. Technically, you don’t have any future, concrete scheduled surgeries, only the plan to eventually have to have one. Nothing is absolute, from the way I am understanding this, merely a possibility.
For example, companies will ask if you plan on flying a plane in the next 2 years. Most of the time, the answer is no. But what if someone who was obsessed with getting their pilot’s license in the future ends up getting one a year after the policy takes effect? At the time of application, there wasn’t the intent to misrepresent your future plans because… they weren’t actually plans. But would the insurance company still pay out?
In this case, agents will ride the fence between disclosing vs. not. Some will err on the safe side and say yes to disclose (which could result in a denial for coverage with some companies) and some will say not too because there isn’t a committed or scheduled solution solidified and the recipients’ condition could change or your health could change before the surgery. There are still a large number of variables in play.
Short answer: Honesty is the best policy. Reach out to one of our agents about this and see what they can do.
Hope this helps.
-Luke
Mother just passed. In looking for documents, we found her policy. The policy has her nickname. She used her nickname a lot. Her social security card has her nickname but her ID and passport have her full name. For example if her full name was Patricia—she had Patty on these forms/cards. Will the insurance company refuse to payout, since he’s used her nickname? The insurance agent who sold her the policy should have used her name from her identification card, right? It’s a small $20k policy—barely enough to cover funeral. Stressing. Response urgently needed. 11/26/18
Hi Norma!
I don’t see this causing a major issue for the claim, especially for the small amount of coverage. Derived monikers (“Luke” vs. “Lucas”) from a longer name are extremely common and rarely cause a large issue when it comes to enforcing a policy like life insurance. This type of logic also comes into play with policies written under maiden names.
Yes, the agent didn’t do his due diligence and ensure that the policy was placed in the correct legal name of the applicant; however, I do not see any grounds for the company to not pay the claim.
Hope this helps.
-Luke
Is there anyway to find out whether there was an insurance policy taken out on my father? I have reasons to believe his estranged gf may have taken a policy on him without his consent. Please advise when and if you have the opportunity. Thanks, a bunch.
Hi Taylar!
In this day and age, it is very difficult to take out a policy on someone without their permission or without them knowing. While possible, it is very unlikely given the amount of hoops both the persona and the agent would have to jump through to make it happen. He would have had to sign some documentation allowing her to take out a policy in his name and it isn’t as easy as the movies let on.
Sadly, in this situation, there is no way to check to see if one exists or not for sure. Usually, bank records showing a premium payment or mail/emails from insurance companies that aren’t sales letters are a good trigger that there is a policy in force.
Here is a good resource for you to look at:
https://www.truebluelifeinsurance.com/how-to-find-a-life-insurance-policy-exists/
Hope this helps a little.
Hi,
My ex-husband took a term life insurance with Pri-Amierca insurance company 14 months ago and was killed .. he wasn’t doing anything illegal at the time of his death.. will the insurance company still payout ?
Hi Tasha!
I’m sorry to hear about that. As long as the premiums were paid and the death wasn’t due to an excluded activity, the insurance company would have no grounds (that I can see) for not paying out.
-Luke
father in law only had policy for few months and now her sufer from heart attack and passed will his insurance pay out for it
Hi Gary!
I’m sorry to hear about your loss.
It is probable, but it will depend on the type of policy he has. Some insurance policies have “graded benefits” where there is no coverage for the first 2 years for health-related deaths. However, these policies aren’t as common as some of the other policies you can buy on the market.
I would expect the insurance company to investigate the death and the application to ensure there wasn’t any misrepresentation prior to anything paying out.
Hope this helps a little.
My step father died in 2017. While going through his desk to gather important
papers for my mother, I came upon 3 life Insurance policies. 2 showed my mother
as sole beneficiary, and 1 showed his grown children. I put them in a folder and gave
them to my mother. I explained to her that once she gets his death certificate, she needs
to file the claims. My brother is the executor to her estate, so basically he took over all
the financial guidance for my mother from that point on. She has a substantial amount of
money in her bank accounts, so I assumed she was paid for these policies.
In a recent conversation, the topic of life insurance came up, and she told me she did not
receive any money from the insurance. She stated that they told her the only benefit she was
allowed, was to continue paying the premiums and that she would own the policies now!!??
She didn’t want to do that, and is convinced that was the end of the story. My mother is 87,
Doesn’t have dimensia per say, but has much confusion and has even made significant errors
doing her banking etc. she is also struggling desperately to keep her independence, and fights
every step when I, or my brother – as she says “telling her what to do”.
She has the policies, but tells me that she has handled it, and has no intentions to have me look
into it further. I’m concerned and above all else, frustrated.
My question is- has there ever been that kind of policy written? Is there even such a thing? If I in fact
find these policies, how much time does she have to collect? I haven’t shared this with my brother, and
won’t until I get proof myself that this is correct. It’s making me uneasy that it was never discussed or challenged.
My mother is not savvy enough to decipher the policy…but my brother is. Since I was his step daughter,
is there any way I can get a copy? I’d like to know your feelings about the whole issue. Thank you
Hi AK!
Wow… alot of information to digest and a bunch of moving pieces, so I am going to answer this as clearly as possible.
“Doesn’t have dimensia per say, but has much confusion and has even made significant errors doing her banking etc. she is also struggling desperately to keep her independence, and fights every step when I, or my brother – as she says “telling her what to do”.”
From an insurance perspective, unless she has been deemed mentally incompetent by a government entity, she still has control and say over what she does with the money and can purchase insurance products on her own. If you feel there is concern for her well-being, please… reach out to a lawyer who understands elder law for legal remedies to protect her. We are not legal professionals, so we can’t provide any legal advice.
” has there ever been that kind of policy written? Is there even such a thing?”
A policy that you pay the premium that has no payout as a benefit but you “own” it? That’s not a policy I am familiar with not one that I think that is legal. Something isn’t right or adding up given the info.
” If I in fact find these policies, how much time does she have to collect?”
Depends on the policy and the law that governs it. It is clearly laid out in the policy paperwork as well.
“is there any way I can get a copy?”
Probably not. This is where talking to a legal expert will come in handy. If there is a concern of an elder being taken advantage of financially, then a legal consult would be your best next step.
As far as your brother, I would tread lightly. When it comes to family and money, things can get intense.
Hope this helps a little.
you are a very knowledgeable person about life insurance and the very small details .is true blue a life insurance company. i need to get a policy,i had the unfortunatehappen to my wife in 2015 ,she or we did not have life insurance for her .well u know the how bad that turned out. i need a policy ,61yo, very good health,got injured at work and on ssd ever since .dont drink ,quit when i was old enough to drink legally, quit smoking 5 years ago ,too expensive. dont do drugs. i have no spleen ,ruptured it in a fall.had operations on neck and i also have back problems from injury at work. who can i call for life insurance, i dont want my daughter to deal with a no insurance, my dead body . is blue a insurance company. think i asked that already. thank you for your time.
Hi Robert!
Yes, we are an insurance agency and we can get a policy set up for you. Give us a call today at 866-816-2100 and talk with someone about your situation to see what policies are best suited for your current situation.
Hello,
My younger brother and I both took out an insurance policy with Primerica in March of 2018 after our Grandmother passed away. My brother was tragically killed 8 months later in November of 2018, because the policy is less than 2 years old the company has the right to contest it which is fine. However, it seems as though they are fishing for a reason not to pay. They have requested a ton of information such as his court records and the homicide investigation results etc. The adjuster has stated to me more than once that on the application he was asked if he’s ever been convicted of a felony in the past 10 years which seems very specific and intentional to me. First of all, he was never asked that question during the application process (neither was I). Although he was only 24 at the time of his death he has in fact been convicted of a felony within the past 2 years but they never asked him that specific question. The agent who opened our polices has been terminated and is no longer with the company. So at this point it will be my word against theirs… I don’t know what to expect and am quite worried a frustrated at this point. My brother is gone and there is nothing I can do to change that. I would rather not be in these shoes right now.
Thanks,
JC
Hi Jai!
I am sorry to hear about your brother and the current situation you are in.
I used to write policies for Primerica and I left because I didn’t feel they were the best option for life insurance compared to other companies, especially when it comes to paying out.
“My brother was tragically killed 8 months later in November of 2018, because the policy is less than 2 years old the company has the right to contest it which is fine. However, it seems as though they are fishing for a reason not to pay. They have requested a ton of information such as his court records and the homicide investigation results etc.”
They might be stalling payment. It isn’t unheard of for this to happen with particular companies. If they have received the documentation, then they need to make a decision. If they continue to stall, file a complaint with your state Department of Insurance. That usually speeds up the process.
“The adjuster has stated to me more than once that on the application he was asked if he’s ever been convicted of a felony in the past 10 years which seems very specific and intentional to me. First of all, he was never asked that question during the application process (neither was I). Although he was only 24 at the time of his death he has in fact been convicted of a felony within the past 2 years but they never asked him that specific question. “
A very common question on life insurance applications. If the claim is denied because of misrepresentation, I would ask to see the copy of the application that was submitted to underwriting. If they refuse or can’t produce it, filing a complaint against them may be the best next step.
“The agent who opened our polices has been terminated and is no longer with the company. So at this point it will be my word against theirs…”
Primerica has one of the highest attrition rates in the industry and the amount of “orphaned” policies is staggering. Turn around there is extremely high.
If the company still hasn’t paid out or made a decision, contacting the Department of Insurance is your next best bet. If enough complaints are entered for a certain company, it can cause them to have to deal with a bunch of red tape that companies don’t like dealing with.
Hope this helps a little
We found that my father had a life ins policy we weren’t aware of. I found by accident while doing a search on a web page provided by the state ins commission. One day (after several minths) I recieved an email saying Manhattan life was processing and was given info to contact them. This came as a complete surprise as my father passed away 10 yrs ago. My siblings and I sent required info only to receive another letter asking to fill out another form w info on a single form. This form requires 2 witnesses (no relationship to us) and notarized with death certs of parents and 2 deceased sisters. Death certs cannot be copies so again we are sending official certs.
Questions:
1 – is this normal?
2 – they won’t provide a copy of policy is this normal?
as we have no idea what it pays out.
3 – do they have to provide policy so we understand it’s worth? We have never seen pymts come out of his accounts
4 – do you know where we can find out if his us savings bonds were cashed
Thank You
Hi Johnny!
1 – is this normal?
Yeah, this is normal. They make you jump through hoops like this for legal purposes.
2 – they won’t provide a copy of policy is this normal? as we have no idea what it pays out.
That does strike me as odd. Did they say why the policy was not able to be provided?
3 – do they have to provide policy so we understand it’s worth? We have never seen pymts come out of his accounts
I would ask for the legal explanation on why they cannot provide a copy of the actual policy as this is the only way you can verify the contract’s value.
4 – do you know where we can find out if his us savings bonds were cashed
Great question. I do not know. I would talk to someone at the bank on this question.
Hope this helped a little!
My Dad had an insurance policy with his niece as the beneficiary, before he moved with me. His niece died. We forgot to change it over to my name and he died two months ago. So it went to his estate. What would the pay out?
Hi Samantha!
Yeah, those situations fall into the probate law realm and can be tedious to deal with.
At this point now, it is really up to the courts to decide who gets what and how much. This is why I encourage my clients to review beneficiaries every few years to make sure they know who is getting what and see if any changes need to be made.
What may happen if my dad wasn’t truthful on his policy and I submit a claim? He completely the policy on his own and has recently passed, the only thing he provided me was the policy number and amount.
Hi Brian!
That really depends on what he was not truthful about. A minor discrepancy like having 3 speeding tickets instead of 2 may not carry too much of an impact. Outright fraud may be an entirely different story. If there is a high dollar amount, they will most likely do a deep review of his application, death records, and medical records to see if there is anything that isn’t adding up. Without knowing what he wasn’t truthful about makes it hard to comment.
Hope this helps.
If I put my husband in insurance and a couple days later he died..wil I still get a payout?
Hi Susan,
In most cases, yes. It would depend on the type of policy you have in place. For example, some of the final expense or guaranteed issue type of policies may have a “graded benefit” period where there is no coverage for death by natural causes for the first 2 years. Instead, they often refund the premium.
Hope this helps.
-Luke
Hi Luke,
Thanks for the free info. My siblings and I have an interesting situation at the moment that I came to your site to research. Our father had set up a trust in each of our names when we were young claiming that we would receive a payout of $200,000 each when he passed. After the recession he stopped making payments. The value of the trusts have since been eating away at themselves to pay the premiums. As far as we can tell, they currently have about $10,000 left. Would it be possible/intelligent to pay back the unpaid premiums ourselves to get the full value of the trust upon his passing? Or has the value already diminished over the years?
Thanks in advance for your help!
-Mike
Hey Mike!
That is a tough call without seeing the actual documents. Personally, I would probably consider not bothering paying back the premiums, but without seeing what exactly we are working with, I really am limited on how much advice to give as far as direction.
hope this helps.
My Dad’s roommate did not contact family when my dad went into the hospital. Instead, she misrepresented herself as my dad’s daughter and made the medical decision for my dad to be put on life support. When my dad didn’t show up for church on Wednesday night, his pastor went looking for him and contacted me that my dad was in the hospital 3 days later. Upon visiting the roommate, she told me that she was the beneficiary to Dad’s life insurance and that her lawyer told her she didn’t have to change that. Later, we found out that she misrepresented herself on the insurance policy as a “step daughter”. We believe that the beneficiary change was made while dad was diagnosed with dementia and reported it to the Attorney General. They are saying that they don’t think they can prove the change was made without my dad’s knowledge. Will the life insurance still be payed out to the roommate, even though she misrepresented herself?
What a terrible situation all around. Not uncommon, but terrible nonetheless.
You have many varying issues here across both the legal and insurance spectrum. Please reach out to an attorney on the legal issues like the misrepresentation on making medical decisions and other types of concerns.
As far as the life insurance issue, unless he was declared mentally incompetent before the policy was taken out, there is little that can be done. Misrepresenting oneself as a beneficiary is not a major issue and you can make anyone a beneficiary if there is an insurable interest on the part of the beneficiary. In this case, even as the roommate, she could credibly argue that his passing placed her in some sort of financial peril and the company would most likely payout per the contract.
Being diagnosed with dementia is not something the company would know if the diagnosis happened after the policy was placed in force. Changes to beneficiaries require no authorization by the company either, so if there was no legal order declaring him incompetent, then the company is obligated to pay out per their contract.
I would suggest talking to an attorney about this more in depth to see if any laws were violated on her part.
Hope this helps a little.
Hi Luke. My father in law had been paying his life insurance policy for the last 5 years. Unfortunately he just missed his payment on Jan 8th 2019. He passed away unexpectedly on feb 23rd 2019. My husband was named beneficiary but when he called they told him it had lapsed and they were not paying. Is there anything we can do? He payed for 5 years and just missed his last payment. How can we get at least a small payment to help with funeral cost?
Hey Casey,
This is a pretty common occurrence. Based on the way you are relating the issue, it sounds like your father had a term life insurance policy if they canceled it because of a lapse. With permanent policies, missed premiums are usually deducted from the cash value, helping ensure the policy stays in force. Term life doesn’t have this feature. I recommend finding a copy of the policy to determine what, if any, remedy there is.
Hope this helps a little.
The most informative post you have shared on this page about the 7 ways of life insurance will not pay out but if you smoke or if you have ever smoked is a pretty standard question on any life insurance application. Maybe you quit smoking a couple of years ago. The insurance company will still ask if you used to smoke and how long ago you quit. It matters, because the effects of smoking are long term. Some insurance companies might classify you as a non-smoker if you haven’t smoked for a couple of years. For others, it might take five or 10 years of not smoking before you’re considered a non-smoker .
Thanks.
What is a dividend interest payment? I just received a check on behalf my late husband who passed away in 2015. His latest check stubs indicate a supplemental life insurance policy.
Hi Marilyn,
A dividend payment is when a permanent policy (whole life or universal) is credited for some sort of gain, or profit. In most cases, you see this with whole life policies with mutual companies. Just like how stocks earn dividends payable to the shareholder, dividend payments are paid out by the company as part of their “benefits”. You see this almost always in a “mutual” company because these companies are actually owned by the policyholders and profits made by the company are paid back to the policyholders since these people are “owners” in the company. In most cases, people opt for an increase in their coverage; however, it is not uncommon for there to be a payout via check for this.
Hope this helps!
Hello, Luke. My father had life insurance through his employer. He has been with the company for about seven years, and for six years, the employer had the same insurance provider. However, his employer switched insurance companies. In the first month of his new benefits, my dad passed suddenly from cancer he didn’t even know he had. Is there a possibility his life insurance won’t pay out because the company switched insurance providers and he was only covered under the new insurance for 24 days?
Hi Dave!
I’m sorry to hear about your dad.
In every case that I am aware of, your dad’s coverage should be fine. In group life policies such as this, it is common for companies to change carriers on a regular basis and I’ve not heard of anyone not getting paid out because they died shortly after the policy took effect.
If for some reason they refuse to pay, please contact your dad’s HR about this. Since the company has a relationship with the insurance company, they may have some recourse in appealing any negative outcome.
Hope this helps a little.
I have a question not sure you can answer. I live in Ohio so i am sure this makes a difference. The company i am partners in pays for the life insurance one of my partners and i assumed the company was to get that money should something happen. Well come to find out the company pays a lot of money for his premiums each month and we are not the beneficiaries of the policy. Can this one be legal and two can the company and the partners change this??
Hi Rickey!
This could be a really complex issue. On something like this, I would encourage you to discuss the matter with legal counsel and have them review the policy. In most cases, key man or buy-sell policies are relatively simple, but this may have more layers to it that an attorney may provide more insight and remedy.
Hope this helps.
My partner passed and the insurance Co will not pay whole life policy for. $10,000 becabuse the policy is less than 2 years old. I am the sole benifary. What do I do
Hi Gary!
This is called “graded benefits” and in most policies, if the death occurs in less than 2 years for health-related costs, the premium is refunded (sometimes including interest) to the estate of the deceased. I would follow up with the company that wrote the policy and the agent (if possible) to see what the recourse is for getting the refunded premium if possible.
Hope this helps a bit.
My father passed 1/18/19 and was in the hospital from like 11/28/19 til his death and missed his payment on 12/7/18 and they are not trying to uphold his policy because he was pass the 31 day late mark so if he would of died 10 days earlier they would of paid
Hi Jamal!
I’m sorry to hear about your father and the mess that is going on currently with the life insurance.
With most of the policies out there, a 30 day “reinstatement” period exists once the policy payment has been missed and will still honor the contract and benefit payouts. After this grace period is passed, the policy can be reinstated but the insured must provide some legal paperwork regarding his or her health status to allow this policy to be reinstated.
In this situation, as much as it may not be ideal, because the policy wasn’t paid and the grace period expired, the company is not obligated to pay out policy benefits. This is why I encourage all clients to have premiums come out automatically via ACH or card when possible to prevent there being lapses in coverage when they need it the most.
Hope this helps a little.