You intend to purchase life insurance to provide for your loved ones’ financial wellbeing should you unexpectedly pass.
You are a responsible person and pay your premiums on time, so you fully expect your beneficiaries to receive the death benefit without delay should something happen to you. But did you know that when you die, insurance companies scrutinize your initial application and medical questionnaire, looking for any possible excuse to deny your beneficiaries’ claims?
It’s true. Insurance companies are in the business of making money for their shareholders, and they only do that when they don’t pay beneficiaries’ claims. Find out how you can avoid making the top three innocent mistakes that cause claim denial due to misrepresentation and fraud.
1. Failing to Disclose Past Health History
Perhaps you were diagnosed with diabetes some ten years ago, but lost weight and got fit and recovered. Perhaps you had high blood pressure or hypertension at one time, but again, changed your diet, lost weight, and recovered. Perhaps you had a small cancerous mole removed from your back many years ago, and since then you’ve avoided sun exposure, so you have forgotten all about it. Perhaps you had bone spurs removed.
Even if these things happened years ago and no further related medical problems have developed, all of these things must be disclosed on your initial application for life insurance and the medical questionnaire. Why? Because they affect the amount of risk you pose to the insurer of experiencing a loss within the term of your policy. Those with lower risk pay lower premiums. Those with higher risk pay higher premiums. In some cases, the risk is so high that an applicant will be denied coverage entirely.
When an insured fails to disclose their medical history completely, the insurer will seize the opportunity to allege that the insured misrepresented themselves and committed insurance fraud. The insurer will void the policy and deny beneficiaries’ claims for death benefits. This is especially true if the insured died within the two years following the purchase of the policy, called the contestability period. During the contestability period, your beneficiaries’ claims will be denied even if the cause of your death had nothing to do with the condition, disease, or surgery you failed to disclose.
The fix: be sure to disclose every aspect of your medical history, even if it seems long ago or insignificant. Do not give your insurer an excuse to deny your beneficiaries’ claims.
2. Failing to Disclose Past Lifestyle Habits
Just like past health history, past lifestyle habits of long ago may seem insignificant enough to omit from your application for life insurance. Do not make that mistake! The following lifestyle habits, among others, must be disclosed to your insurer, whether current or past:
- Social alcohol use
- Habitual alcohol use
- Alcohol misuse, abuse, or addiction
- Binge drinking
- Smoking cigarettes or cigars
- Smoking anything else
- Chewing tobacco
- Recreational drug use
- Recreational drug addiction
- Recreational drug overdose
- Prescription drug reliance
- Prescription drug addiction
- Prescription drug abuse
- Prescription drug overdose
If you have ever been in any treatment programs, in- or out-patient, including therapy or hospitalization, that must be disclosed. Many people with substance abuse problems have considered or attempted suicide, and that too must be disclosed.
Again, it is a matter of risk. Those with substance abuse issues in their past may have damaged their health even although they no longer abuse that substance. Even social or occasional use of alcohol and proper use of certain prescription drugs pose health risks.
Disclose all past lifestyle habits and also any treatment you’ve had for substance abuse if any. In the worst-case scenario, you will pay a bit more in premiums. But do not omit this information from your application thinking you will just save in premiums, because your insurer will certainly use that omission as an excuse to deny your beneficiaries’ claims even if the cause of your death was wholly unrelated.
3. Failing to Proofread Your Application and Medical Questionnaire
It is very common for an insurance agent to complete your insurance application for you. It is also very common for an agent to make an error on that application, resulting in an allegation of misrepresentation and denial of your beneficiaries’ claims.
Be sure to proofread every aspect of your application for errors. Even something as innocuous as the transposition of the date of your birth can result in an allegation that you lied about your age to get a cheaper premium, and your beneficiaries’ claims will be denied.
Thoroughly reviewing your application and medical questionnaire before signing it will ensure that the information is correct and that your insurer has no excuse not to pay out to your intended beneficiaries.
About the Author
Veronica Baxter is a blogger and legal assistant living and working in the great city of Philadelphia. She frequently works with Chad Boonswang, Esq., a life insurance beneficiary attorney.