At Crosley Law, we’ve helped many grieving families after the unexpected loss of a loved one. While we focus our practice on catastrophic injury claims, our clients frequently come to us with questions about life insurance claims.
Below, our lawyers outline the essentials of Texas life insurance law.
How Do Life Insurance Policies Work?
After a loved one’s death, you’ll have to wrap up their affairs and distribute their assets to their heirs and beneficiaries. In addition to their home, bank accounts, and personal items, they may also have life insurance policies.
“While the policy structures are different, there are some common elements to every life insurance policy.”
There are two primary types of life insurance policies:
- Term life insurance covers a limited time period, such as ten years, unless it’s extended.
- Whole life insurance covers a longer period of time or the policy-holder’s entire life and builds cash value over time.
Permanent life insurance policies are also categorized as “permanent life” or “universal,” depending on their terms and conditions.
While the policy structures are different, there are some common elements to every life insurance policy. First, each policy has a set amount of coverage for death benefits. If the circumstances surrounding your loved one’s death meet the policy’s requirements, the insurance company should pay this amount when you file a claim.
Second, your loved one named a beneficiary or series of beneficiaries for their life insurance policy. Beneficiaries are typically the only people who have a right to file a life insurance claim and receive its death benefits. If there are multiple beneficiaries, each person will get a specific percentage of the life insurance benefits.
How Do I File a Life Insurance Claim?
When you file a life insurance claim, you may need to provide copies of your loved one’s death certificate and other end-of-life documents. The insurance company may have you complete a series of forms. The insurance company will then review the claim and decide whether you are eligible for life insurance benefits. Depending on the circumstances surrounding your loved one’s death, the company may also ask you for additional information that supports your claim for death benefits.
If the company approves your claim, you should promptly receive your share of the life insurance benefits. However, if you’re denied, don’t give up. Instead, consult with a lawyer to help you decide whether to pursue your claim further. Sometimes, life insurance companies improperly deny claims — and you have the right to appeal their decision.
Common Reasons for a Denied Life Insurance Claim
Every life insurance claim is different and deserves a personalized analysis from a life insurance lawyer. However, we’ve noticed some common trends in life insurance denials.
Late or Missed Life Insurance Payments
Mistakes happen, and people sometimes miss a payment or make late payments. If life insurance policy premiums aren’t up-to-date, the company may deny a claim. However, the laws surrounding lapsed policies and late payments are complicated, and you may still have a valid claim under certain circumstances. If you have questions about a lapsed life insurance policy, consult with a life insurance lawyer right away.
There Were (Alleged) Misrepresentations
Life insurance companies use information about a policy-holder’s age, medical conditions, and health risks to calculate premiums and available coverage. When someone makes inaccurate statements, either intentionally or accidentally, the insurance company will sometimes use these mistakes to deny a claim, especially if the claim is made during the “contestable” period, which usually is the first two years after the policy was issued.
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However, not every mistake or omission is grounds to deny a policy. For example, we represented a widow whose husband listed his doctors and medical history when he applied for his life insurance policy. Later on, the company tried to deny his wife’s claim even though it never bothered to review his medical records before issuing the policy.
Instead, the life insurance company denied the claim on the basis that he failed to disclose that his doctor had recommended he undergo a certain medical procedure which may have revealed the presence of cancer. With help from Crosley Law, she proved the company wrong and was able to receive the insurance proceeds due under the policy, plus reimbursement of her legal fees as well.
The Policy Doesn’t Cover Your Loved One’s Cause of Death
Sometimes, a life insurance policy will exclude certain causes of death. While this is becoming less common, there are still policies that will deny life insurance benefits after a suicide, a death that occurs while committing a felony, or certain dangerous activities.
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However, sometimes there are limits to these exclusions. For example, after a period of years, a life insurance policy may cover suicide. For this reason, you should always consult with a lawyer when a life insurance company tries to use a policy exclusion to deny a claim. With a careful investigation, it may turn out the exclusion doesn’t apply.
Denying a Life Insurance Claim in Bad Faith Is Illegal in Texas
Texas law recognizes there is an extreme imbalance of power in insurance claims. Since you’re probably unfamiliar with insurance law and medicine and have never read a policy, all insurance companies must act in good faith when they’re reviewing and processing claims. That means that they cannot:
- Unreasonably delay life insurance claims
- Deny a claim without an adequate investigation
- Refuse to give you a reason for a denied claim
- Deny claims that are clearly valid
- Unreasonably delay the payment of death benefits
- Make intentional misrepresentations about the policy’s language or the law
- Threaten or intimidate you or other claimants
- Withhold information about your life insurance claim (when requested)
If you can prove the insurance company denied or delayed your life insurance claim in bad faith, they may owe you more than death benefits. A judge may order them to compensate you for your pain and suffering, attorney’s fees, and other losses — and award punitive damages that punish the insurance company for its misconduct.
While some insurance companies and adjusters are more likely to push boundaries and act in bad faith, the State of Texas does not require them to report bad faith allegations to the Texas Department of Insurance.
If you believe an insurance adjuster or company was acting in bad faith, you should immediately contact a life insurance lawyer at Crosley Law.
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At Crosley Law, we’re proud to serve Texans during their most challenging times. Whether you have questions about a life insurance claim, a personal injury case, or another serious legal issue, we’d love to hear from you. To request a free consultation, simply complete our online form or call us at 210-LAW-3000 | 210-529-3000.
The content provided here is for informational purposes only and should not be construed as legal advice on any subject.