Almost 80% Of All Claims Are Delayed Or Denied

When we think about life insurance, we imagine peace of mind for our loved ones, knowing they’ll have the financial support they need. But what happens if there’s a delay in the claim payout? Sadly, this happens more often than most people realize. Almost 80% of all claims are delayed or denied for one reason or another. And in many cases, these delays could have been avoided with a little preparation and awareness.

Today, we’re diving into the top three reasons life insurance claims get delayed — and what you can do right now to prepare your family and prevent these issues.

1. Missing or Incorrect Information

This might seem simple, but missing or incorrect information can throw a huge wrench in the payout process. This often happens with employer-provided life insurance policies, where details like an employee’s last working date or their final salary are essential for calculating the payout amount. Imagine your loved one expecting financial relief, only to be told that additional information is causing the delay. It’s a frustrating experience and one that can set the payout back by weeks or even months.

Real-Life Example: Let’s say you recently switched jobs or adjusted your coverage, but the insurer hasn’t updated your last working date or salary. If these details are missing, the insurer will have to go through more steps to verify everything, delaying the payout.

2. Beneficiary Confusion or Dispute

Family dynamics can complicate things, especially when it comes to life insurance beneficiaries. If someone calls the insurance company and disputes the named beneficiary, it can lead to a lengthy investigation. They may claim that the beneficiary designation isn’t valid or that the insured wasn’t of sound mind when signing the form. Even if these claims aren’t true, the insurance company has to pause the payout and investigate thoroughly. It’s part of their responsibility to make sure the payment goes to the right person, but this process can significantly delay things for your loved ones.

Real-Life Example: Picture this: You’ve designated a specific family member as your beneficiary, but another relative disagrees, claiming it was a mistake or even fraud. This can stop everything, as the insurer will have to verify the legitimacy of the designation, causing delays that are stressful for everyone involved.

3. Verifying the Cause and Manner of Death

In some cases, the insurance company has to verify the exact cause and manner of death. This usually happens when the death certificate is listed as “pending” due to an investigation or an autopsy request. Until the insurance company knows the cause of death, they can’t determine whether it’s covered under the policy. For example, if a death is ruled accidental, it could qualify for a higher payout if the policy includes accidental death benefits. But if there’s any suspicion or ambiguity, like in cases of potential illegal activities, the payout may be denied.

Real-Life Example: Imagine someone passes away in a car accident. If it’s determined to be an accidental death, the policy might pay out an additional benefit. But if the person was involved in illegal racing, for instance, the insurance company may rule it as a non-qualifying event, potentially even suicide, which wouldn’t be covered.

Preparing Your Family to Avoid Payout Delays

While not every delay can be avoided, being proactive can save your beneficiaries a lot of stress and uncertainty. The key is to stay informed and communicate with your family, so they know what to expect if and when a claim needs to be made.

Want more guidance on getting your life insurance organized for your family? Let’s connect for a free 15-minute consultation. I’ll help you take the right steps to ensure your loved ones are prepared and confident in navigating your policy, no matter what life brings.