Life insurance benefit denial clarification

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PostPosted: Tue Sep 22, 2009 12:44 am   Post subject: Life insurance benefit denial clarification  

My employee lost his mother due to a cerebral hemmorage about two weeks ago. He hasn't been denied the benefits of any policies yet as he has not notified them of the death. Are there policies that only pay on accidental deaths only or natural causes only but not both? In talking with relatives, he discovered that a cousin did not recieve benefits of 50,000 from his death. Apparently benefits were denied because he had drank one beer while cleaning his pool and in the process had a heart attack. He subsequently fell into the pool and drowned.



We are assuming they found water in his lungs and he died of the drowning before succumbing to the heart attack. This has given both of us cause to examine our life policies to see about exclusions. Is it possible this man had a life insurance policy only payable upon death due to natural causes and the insurer deemed that he died of the accidental drowning moments before he might have died from his heart attack.



Or are there clauses in life insurance policies that deny coverage because coincidental drinking of one beer that led to the drowning was attributed to the premature demise? Seriously, I am not making this up, we are looking for clarification to see if this usual and customary in the field of life insurance or are the decedents dealing with a corrupt insurer and need to file a complaint with the DOI.



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PostPosted: Tue Sep 22, 2009 6:58 am   Post subject:   

I guess they've considered it as his 'material misrepresentation' while applying for the policy. Simply put, I think he's misled the carrier by not disclosing his drinking habbits. It's quite possible, and that's what makes it so important for us not to hide facts from our carrier.

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PostPosted: Tue Sep 22, 2009 2:04 pm   Post subject:   

Are you saying that when you fill out an application for life insurance and it asks how much do you drink; you list the amount you imbibe at the time of the application. If your habit increases as you age from one beer every two days to two beers a day and you happen to be drinking at the same time you suffer a heart attack and fall into the pool, that the insurer could deny the benefits? Or even if you did not drink at the time of the application and you were not informed that the benefits could be denied if you begin a habit of occassionally drinking one beer or two a day, that the insurer could call that misrepresentation because you did not inform them that you began drinking three to five years after the policy was purchased?



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PostPosted: Wed Sep 23, 2009 5:51 am   Post subject:   

A life insurance applicant has to go through medical tests that help determine his rate. It also sets an opportunity for the carrier to analyze the risk potential of the prospective client. So, it's always advisable that the client discloses his pre-existing conditions as well as his habbits to the carrier.



I guess for policy holders who enjoy a Termlife policy, adopting such habbits as smoking or drinking might lead to a higher rate or may even cause a non-renewal at some stage. But I'm not aware whether permanent life policy holders would lose in terms of their policy cash value if they resort to such habbits at a later stage.

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PostPosted: Wed Sep 23, 2009 8:15 pm   Post subject:   

If the policy was in force for two or more years before the death of the insured "material misrepresentation" and "pre-existing conditions" would have nothing to do with it.

I'm also not sure what the beer he drank before dying could have had to do with it.



While many have policies that cover only accidents and not death from natural causes, I've never heard of one that covered natural causes only and not accident. Unless it was a specific disease policy (cancer only policies are quite common for some strange reason).

Most likely is that your employee has the facts reversed and his cousin had what is called an Accidental Death policy, which would almost certainly have denied coverage on the basis that the heart attack was the proximate cause of his death.



Another important reason to be sure you and your loved one's know what kind of coverage you have, before it is too late.

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PostPosted: Wed Sep 23, 2009 9:52 pm   Post subject:   

Thanks, for responding, that makes logical sense.



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PostPosted: Tue Oct 13, 2009 11:37 pm   Post subject:   

Fishman, great reply. I think that you hit it on the head with your post. As well, I don't know any life insurance application that specifically asks "how much do you drink?"



I've seen life applications that ask if a person has ever sought out or received treatment for addiction to alcohol or drugs...this would be a definite underwriting concern!



Your discussion regarding the incontestability provision was also right on target. An insurance company is only allowed to rescind coverage on a policy or cancel the coverage if there was a material misrepresentation or fraud on the application for insurance and the information was discovered within the incontestability period, which is normally two years.



If the insured died after the incontestability period, the insurer would have to pay the claim unless the death was excluded for other reasons.



Finally,



Quote:
I guess for policy holders who enjoy a Termlife policy, adopting such habbits as smoking or drinking might lead to a higher rate or may even cause a non-renewal at some stage. But I'm not aware whether permanent life policy holders would lose in terms of their policy cash value if they resort to such habbits at a later stage.




Term life insurance policies that are renewable do NOT ask for proof of insurability or health upon renewal. You must simply pay the premium. As well, they are not normally allowed to reclassify an insured based on non-standard conditions that appear after the policy is issued.



Cash Value and permanent insurance policies have nothing whatsoever to do with this concern.



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PostPosted: Sun Nov 15, 2009 9:09 pm   Post subject: Death Benefit Denial  

You would be shocked to know how many death claims get denied. What people don't realize is that when you file a death claim you entered a dog fight, so be prepared. The insurer will be looking for reasons not to pay the claim.

On the deceased's death certificate it may say "accidental", but there is often a "due to ..." statement as well. That is where claims get denied. The relevant questions are:

1. Was the policy an Accidental Death policy or not?

2. Was the policy employer-sponsored?

3. What was the medical history of the deceased?

If the policy was not an AD&D policy the cause of death shouldn't be an issue as a cerebral hemorage is an unexpect cause. If the coverage was employer sponsored it will be governed by ERISA law, which is very specific. If the claim is denied he will have one chance to appeal, so he needs to be thorough. The insurer will be looking for "other contributing factors" so getting a copy of medical records, and having them reviewed by an expert will be critical.



You should encourage him to get expert help so he receives the money his mother intended him to get.

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PostPosted: Mon Nov 30, 2009 10:14 pm   Post subject:   

Sorry to day to LifeInsuranceDisputes, but I don't think you are knowledgeable about the payment of death claims. The life insurance industry as a whole, pays HUNDREDS OF BILLIONS of dollars each year in total death claims. They do not pay claims for non-accidental deaths if the policy only covers accidental death. Taking more than the prescribed amount of a prescription drug or being intoxicated by alcohol, are common reasons found in AD&D policies or riders to deny a death claim.



And life insurance is not one of the benefits ERISA governs in the way you seem to believe. ERISA does not specify life insurance policy provisions, terms, or conditions. It merely provides for a point in time when a person must be covered by a group benefit plan, of which life insurance is only tantgential. ERISA (Employee RETIREMENT INCOME SECURITY Act) is principally concerned with who can or must be included in an employer sponsored benefit plan, and their contributions, or contributions on their behalf.



Certain employer-sponsored life insurance, such as that for police officers and firefighters, are often limited to causes of death on the job or specifically job-related. Accidental or otherwise. And they need to have personal insurance on top of it, yet many don't, believing they are already covered. But most employer-sponsored group life policies include standard terms and provisions that do no distinguish between causes of death.



Individually-owned insurance can include "true" life insurance (death from any cause) or some form of accidental death benefits (no claim for "medical" death, such as a "cerebral vascular accident" (or, stroke) is payable).



Delaying the submission of a death claim merely prolongs the time before which the beneficiary receives their money. If the death is not covered by the policy, waiting 6 months to file the claim will not change that fact.



Death claims are paid most quickly when the claim form is completed properly and the certified copy of the death certificate accompanies the claim form. In my experience, death claim checks are issued within about 10 days of receipt of the claim and the claim being validated against the policy. Missing information always delays payment of a claim.



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PostPosted: Tue Dec 01, 2009 6:03 am   Post subject:   

Max, Max, Max...take it easy buddy. No need to throw down here. We welcome contributions to the forum and corrections where needed, but remember that we want all to feel welcome to contribute and learn without fear of getting verbally reprimanded.



Your comments concerning ERISA are on-target. ERISA governs welfare benefit plans but is most concerned with retirement and pension environments. ERISA stuff about group plans most surrounds discrimination laws.



Regarding the subject of insurers actually paying claims. "Coverage is coverage," yet a tremendous amount of case law has been written based on this seemingly simple idea. The concept is simple; if coverage applies to the loss at hand, then payment must be made. It's the plain idea of the consideration element in the contract. But how many courts have been clogged by insurers not honoring the contract and being forced to pay? On the same hand- how many insureds have brought (or tried to bring) suit against an insurer because their claim was denied? Litigation is what makes the world go 'round, huh?



Under the "doctrine of reasonable expectations," a commonly held legal concept, an insurance policy is required to cover all areas a person would "reasonably" consider it to cover. The term reasonable is a somewhat subjective term in and of itself. As well, since an insurance policy is legally considered a contract of adhesion, courts will rule against insurers for poorly worded or ambiguous language within their contracts.



Great topic...even though we haven't heard back from the person who wrote original post.



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PostPosted: Tue Dec 01, 2009 11:57 am   Post subject:   

Slightly off topic...



ERISA plays a pretty big negative role when it comes to group disability insurance. The issue is that there isn't much recourse when the insurance company denies a claim. When an insurance company is found under ERISA to have unfairly denied a claim, all that the claimant will get is their claim. In other words, it tends to be in the insurance company's best interest to make the claim's process very difficult and, when in doubt, deny, deny, deny.


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PostPosted: Tue Dec 01, 2009 6:15 pm   Post subject:   

Sorry, InsTeacher . . . my words may come across a bit strong sometimes. It's a fault of my passion to both protect and attack the conduct of insurers and insureds in favor of the party who is being wronged.



And you're right, without litigation this would be a boring place to live. Just like black jack would be boring if everyone was a math major and could count to 21.



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PostPosted: Wed Dec 02, 2009 9:59 pm   Post subject:   

I can count to 21, not so hot at black jack though. all that doubling down stuff and whatnot is a bit much. BTW, does anyone actually take "insurance" in black jack?



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PostPosted: Thu Dec 03, 2009 12:26 am   Post subject:   

"Insurance" in black jack is a sucker's bet that gives our industry a bad rep. Like insurance in the real world, most people fail to understand how it works.



It's only truly useful when you have a large bet on the table and draw a natural 21 to the dealer's showing ace. You can achieve essentially the same thing as "insurance" in some cas-i-nos (they filter the word!) by simply declaring "even money" instead of the normal 3-to-2 payout in lieu of putting another 50% of your bet on the table. It's only a true "loss" to you in the event the dealer doesn't have a natural 21.



With "insurance," you lose your premium, but not your bet -- either way. If the dealer doesn't have a natural, you get your 3-to-2 payout, but it's a wash because you're getting the equivalent of your premium refunded to you. If the dealer has a natural, you get 2-1 on your insurance play, but nothing on your original bet. $50 bet, $25 insurance, $0 payout for 21, $50 return for insurance. Even money. If the dealer doesn't have a natural, you still end up with even money: $50 bet, $25 insurance, house takes the "premium", pays you $75. You put up a total of $75, they pay $75, even money. Can't win, but don't lose.



0% loss ratio to the house!! Can only result in a profit to them from everyone else without a natural who pays when the dealer doesn't hit.



If you don't have a black jack, buying insurance is a waste of money, and you're losing half your original bet right up front, plus the original bet if the dealer doesn't have a natural and you don't beat the dealer's eventual total -- in other words, you lose 3-to-2, when you would have only lost 1-1.



That's better odds than in the real world of insurance.



To put it in real world terms: It would be like buying a $100,000 life policy, and paying a single premium of $20,000. The company says to you, "We believe you're going to die on 2-1-2021, and we won't pay any death claims to anyone who dies on that date. But if you're willing to give us another $10,000 today, if you do die on 2-1-2021, we'll give your beneficiary back the whole $20,000. If you die on any other day, then we'll still pay the $100,000."



Die on 2-1-2021, and your beneficiary loses $90,000 (the difference between $100,000 and $20,000 + the extra $10,000 to preserve the $20,000). Die on any other day, and your beneficiary still loses $10,000 they would have received from your estate if you hadn't paid it to the insurer. No matter how you spin it, it's a losing bet.



Come to think of it, kinda looks like a no-lapse guarantee, doesn't it?



It would be much easier to leave secret instructions to your heirs: "No matter what happens, I cannot die on 2-1-2021," a la Weekend at Bernie's.



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PostPosted: Thu Dec 03, 2009 3:40 pm   Post subject:   

Quote:
Come to think of it, kinda looks like a no-lapse guarantee, doesn't it?




Only for someone who doesn't understand a no-lapse guarantee



Let me make this as simple as possible for you.

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