Critical Illness Claim Pays $520,000 after policy lapsed, reinstated, contested and miscalculated.
In both a moral and financial victory for our client we were able to secure a $520,000 critical illness claim payout from a life insurance policy that the insurance company had cancelled due to lack of premium payment. We got the policy reinstated without having to provide any evidence of insurability – even after 3 months of being lapsed — well beyond the 30 day grace period. We then worked the policy through a contestability review – which is standard in critical illness claims when a policy is less than 2 years old. And, finally, we negotiated a payout of $520,000 which was 30 percent more than the original offer.
Multiple times our client was turned away by both the insurance company and their agent, being told the policy had lapsed and there was nothing anyone could do about it. We uncovered the clerical mistakes that the insurance company made in applying money from a bank draft. We also uncovered a misrepresentation by the agent that had blocked the policyowner from keeping the policy in good standing. In presenting our findings we secured the policy back into good standing as if the lapse had never occurred.
We then submitted a critical illness claim (also known as a Living Benefit) against the death benefit. This triggered a contestable review of the policy going back to the original application. We not only supplied the medical records to the insurer, we also injected a medical opinion in advance of any challenge so the claim for the critical illness benefits could proceed. During this process however the insurer repeated its clerical error again and falsely notified that the policy lapsed. We quickly righted the insurance company’s mistake and misrepresentation.
Finally, the submission for the critical illness claim was evaluated. The insured’s medical diagnosis did qualify for benefits. The insurer shared their initial offer and we immediately disputed their offer because it was inadequate for a stage 3 cancer (leukemia) diagnosis.
Their position was that they could discount the offer because the insured was only 40 years old. The Policy held no such provision. It did have a provision for the amount of premium the insurer expected to receive versus how much it would lose. But, with an indexed universal life policy that becomes a debatable matter. As the policy cash value increases on its own the loss of premium drops significantly. And, as is always the case, the illustration used to sell the policy had a high rate of return assumed. Insurers can’t have it both ways.
The biggest point of contention was the insurer’s use of a provision which stated they would apply an Actuarial Discount to the amount of the death benefit. This amounted to 60%. While an Actuarial Discount was mentioned in the Policy, it was never defined. When the first offer was received there was no explanation for the discount or what was included in its calculation.
We fought and demanded the details as to what this discount was and what it included. Not completely surprisingly, it was mostly assumptions made by the insurer about life expectancy and the loss of profit to the insurer.
On the first point, an insurer isn’t an authority on life expectancy. On the second point, while an insurer is entitled to earn a profit, they aren’t entitled to penalize a policyholder for qualifying for claim benefits.
We argued that the insurer’s life expectancy estimation was not short enough for the insured’s health condition. It’s not enough, we said, to simply use the diagnosis of cancer. In the evaluation and calculation of a cancer benefit the insurer must consider the pathology report and such things as invasive, spread, number of nodes remarkable and other important factors. Rather than accepting their assurance this occurred our own pathologist provided an opinion.
The fight over profitability (our terminology, not theirs’) was heated and intense. Having some insight into policy lapse projections, we made a case against their steep discount. In the end our client accepted a 30% increase from the original Critical Illness benefit offer.
The Center for Life Insurance Disputes is the only firm in the US which specializes in preparing and submitting Critical Illness claims on behalf of claimants. With our industry knowledge and underwriting experience we’re able to secure maximum payouts from life insurance policies that offer Living Benefits. We represent claimants in all US states. For a free consultation about your claim, contact us by email or phone now.
Call: 888-428-4868
Also read:
Critical Illness Insurance Claims Explained