10 Common Reasons Why Life Insurance Companies Deny Claims in [2025] + YouTube Video
When someone purchases life insurance, it’s with the hope that their loved ones will be financially protected if the
unexpected happens.
But what if, after all the planning and premium payments, the insurance company refuses to pay out the death benefit?
The truth is, life insurance claim denials do happen, and when they do, the results can be devastating for grieving families who were depending on that money.
In this article, we’ll explore the most common reasons life insurance companies deny claims, so you can take steps now to avoid any surprises later.
Understanding these pitfalls is essential to protecting your family’s financial future.
1. Misrepresentation on the Application
Statistics show that over 20% of life insurance applicants lie on their applications every year. Most of these applicants already know what the consequences can be but they continue to lie anyway.
One of the leading causes of claim denial is misrepresentation during the application process. This includes:
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Underreporting of medical conditions
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Failing to disclose smoking habits
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Not listing all prescription medications
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Omitting high-risk hobbies or occupations
Even unintentional omissions can be viewed as fraud during the contestability period (typically the first two years of the policy). Insurance companies may rescind the policy entirely if they believe the information provided was inaccurate or incomplete.
2. Death Occurs During the Contestability Period
Most policies include a contestability period, usually lasting two years from the policy’s start date. If the policyholder dies during this time, the insurance company has the right to investigate the application thoroughly.
Any discrepancies—no matter how minor—can be grounds for denial. This doesn’t mean a life insurance claim will be denied, but it opens the door for close scrutiny that could delay or void the payout.
3. Non-Payment of Premiums (Policy Lapse)
A policyholder must pay premiums consistently for the policy to remain active. If a payment is missed and not reinstated within the grace period (typically 30–31 days), the policy can lapse. When that happens, the insurance company is no longer obligated to pay the benefit.
Unfortunately, many families are unaware a policy has lapsed until it’s too late. It’s essential to set up automatic payments or use premium reminders to avoid this outcome.
If a life insurance claim occurs due to non-payment of premiums, the insurer is not obligated to pay and if this is the case, they probably will never pay the claim even if you send in your late premium right away.
4. Death Due to Excluded Causes (Policy Exclusions)
Most life insurance policies contain exclusions—specific circumstances under which they won’t pay out. Common exclusions include:
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Suicide within the first two years of the policy
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Death caused by engaging in illegal activity
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Death while in active military service (in some policies)
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High-risk activities such as skydiving or scuba diving if not disclosed
Policyholders should read and understand all exclusions when the policy is issued, and ask their agent for clarification.
5. Fraudulent Life Insurance Claims
Life insurers are diligent when it comes to investigating suspicious life insurance claims. If the beneficiary is involved in the insured’s death, or there’s suspicion of criminal activity or fraud, the claim can be denied or delayed pending investigation.
While this is rare, it does happen—and it’s a reminder of the extensive due diligence insurers perform before releasing large sums of money.
6. Beneficiary Issues
Sometimes the issue isn’t with the policyholder, but with the beneficiary designation. Common problems include:
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Not updating beneficiaries after life changes such as divorce or remarriage
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Naming a minor as a beneficiary without establishing a trust or guardian
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Having multiple beneficiaries with unclear percentages or priorities
These issues can cause delays, or even court intervention, which may delay or reduce the final payout.
7. Incomplete or Missing Documentation
When a life insurance claim is filed, the beneficiary must provide all required documents, including:
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A certified death certificate
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Completed claim forms
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Policy documents, if requested
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Medical records or autopsy report (if applicable)
Failure to provide documentation promptly can delay or jeopardize the claim. It’s wise to keep important documents organized and inform loved ones where to find them.
8. Death Occurred During Criminal Activity
If the insured dies while committing a felony or engaging in illegal behavior, the insurer may deny the claim based on policy exclusions. For example, if a policyholder dies during a high-speed police chase or during a robbery, the claim may be considered void.
While rare, it is one of the more controversial reasons claims are denied and often leads to legal disputes.
9. Material Change in Risk Not Disclosed
Let’s say a policyholder takes up a dangerous new hobby (scuba diving) or is diagnosed with a serious illness and fails to notify the insurer when required. If this changes materially alters the risk covered by the policy and goes unreported, it can invalidate the policy or affect the life insurance claim payout.
10. Suicide Within the Suicide Clause Period
Most policies have a suicide clause that typically lasts two years. If the insured dies by suicide during this time, the policy may only refund premiums paid rather than issue the full death benefit. After the period passes, suicide is typically covered like any other cause of death.
Some individuals facing dire circumstances turn to life insurance to ensure their dependents’ financial security, even if it means using it for a tragic purpose.
Frequently Asked Questions (FAQ) for Denied Life Insurance Claims
Below are some frequently asked questions we hear applicants usually ask:
Can a life insurance company really deny a life insurance claim?
Yes, life insurance companies can deny claims if specific conditions aren’t met. Common reasons include policy lapses, misrepresentation on the application, or exclusions like suicide within the first two years.
What happens if I forget to pay my life insurance premium?
If you miss a premium payment and don’t make it up during the grace period (usually 30 or 31 days), your policy can lapse. Once a policy lapses, the insurer is no longer obligated to pay out a death benefit.
How can I make sure my life insurance claim won’t be denied?
To reduce the risk of claim denial:
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Be completely honest on your application
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Keep up with premium payments
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Update your beneficiary info regularly
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Make sure your loved ones know where your policy documents are stored
What is the contestability period in life insurance?
The contestability period is usually the first two years after a policy begins. During this time, the insurance company can investigate claims and deny them if they find any material misrepresentation in the application.
Does life insurance cover death from any cause?
Generally, yes — but with exceptions. Most policies exclude certain causes, like suicide within the first two years, death during criminal activity, or undisclosed high-risk hobbies. Always check your policy’s exclusions.
Exclusions can be confusing to read, so if you don’t fully understand them, have your agent help you.
Can a life insurance claim be denied even after the policy has been in force for years?
Yes, but it’s less common. After the contestability period, denials typically occur due to issues like policy lapse, fraud, or exclusions that apply regardless of time.
How to Protect Your Family from a Denied Life Insurance Claim
A denied claim isn’t just a financial problem, it’s a painful shock to your loved ones during their most vulnerable time. Fortunately, most life insurance claim denials are avoidable with some basic policy management and awareness:
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Be honest and thorough in your application. Don’t hide anything.
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Keep your policy active. Set reminders or automate payments.
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Read your policy documents carefully. Ask your agent to clarify anything that is confusing.
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Update your beneficiary information after life events.
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Inform a trusted person where your policy and documents are stored.
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Review your policy annually with a licensed agent to keep everything up to date.
The bottom line? The best way to ensure your loved ones get the protection they deserve is by understanding the rules and avoiding common mistakes.
Exploring the Advantages of Working With an Independent Insurance Agent + YouTube Video
Our Final Thoughts – Life Insurance Claim Denials
To avoid the unfortunate situation of a life insurance claim being denied, it’s important to work with an experienced
independent agent like ourselves.
We strive to ensure that our clients’ policies are as secure as possible, minimizing the chances of a claim being rejected by insurance company lawyers.
To achieve this, we encourage applicants to provide truthful and accurate information on their applications.
Please don’t hesitate to contact us if you have any questions or concerns. We are here 7 days a week to answer your questions. Thank you for taking the time to read this blog post.
All the best,
Jack Venturi
708-334-6226
