Number One Reason for a Denied Life Insurance Claim
Are people hiding their medical history just so they can buy life insurance?
US consumers paid over $15 billion in premiums to buy life insurance in 2023, according to LIMRA. The intent of most is to leave money to their loved ones upon their death. When an insurer receives a claim for the death benefit of one of these policies they may open an investigation to examine for fraud or misrepresentations that will permit them to deny the claim.
There are no exact reports as to how many claims are denied each year but estimates of the dollar amount are more than $1 billion. And by far the most common reason for a denied life insurance claim is a wrong answer about the insured’s medical history on their application for the policy.
So, are people hiding their medical history from life insurers just so they can buy life insurance policies?
We asked a life insurance claims expert to help us understand what’s behind this alarming issue.
“No. Most of the time a wrong answer about an applicant’s medical history is because the person has never seen their own medical records and doesn’t know what has been written in them,” according to Stephen C. Burgess, President of The Center for Life Insurance Disputes, a firm dedicated solely to representing life insurance claim beneficiaries.
When an insured dies the insurance company will get their medical records from the doctors who treated them. The insurer meticulously examines the records identifying any diagnosis, treatment or procedure that was asked about but not disclosed on the insured’s application. If one is found the insurer may use it to deny the life insurance claim.
Was more than $1 billion of life insurance bought by people trying to fool life insurance companies?
“No,” says Burgess bluntly. “The challenge is that many people never request their own medical record from their doctor and so they don’t know what has been written into their record. Like anything, mistakes can be made and notations can be misunderstood by the reader. There have been instances where notations were made but no diagnosis was shared with the patient. Likewise, most medical records use a medical billing language that is more applicable to medical insurance reimbursement than a patient.”
In the case of a life insurance claim being denied, because the insured is dead and can’t answer for themselves much is left to the belief of the insurance company as to what the insured knew when answering the insurance application to buy the policy. Whatever is in the medical record is what the insurer tends to believe the insured knew. In other words, if it’s in their medical record they must have known.
The best defense for an insured to avoid a denied life insurance claim upon their death is to review their medical record while they’re alive. Make sure it’s accurate. If it’s not, get the doctor to correct it. Under the Department of Health and Human Services’ S164.526, medical records can be amended.
But, when it comes to a denied life insurance claim the best defense for a beneficiary is having the finest life insurance claim experts working for them and their claim.
“Many claim beneficiaries file their own claim without having a claim expert working for them to make sure their claim is handled fairly by the insurer and that the claim pays out. A life insurance company makes a profit by taking in premium, not by paying out claims. During a life insurance claim investigation the insurer will not be working for the beneficiary, they’ll be working for their company’s profitability. Bring in your own team,” cautions Burgess.
There’s a difference between hiding information and simply not knowing about it. Being denied a life insurance claim may have the appearance of the insured hiding their medical history when actually they just didn’t know what was written in their medical record.
So, maybe the number one reason for a denied life insurance claim isn’t truly misstated medical history and people aren’t trying to trick life insurers just to buy a policy. Instead, maybe insurers should ask applicants if they have ever seen their own medical records.
Copyright June 20, 2024
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