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Insurance Policy Lapsed Prior to Insurered’s Death

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Insurance companies often deny life insurance claims because a policy has lapsed for nonpayment of premium before the policyholder dies. If, however, the insurance company did not comply with California’s laws on giving notice of nonpayment, the policy remains in force and any death claim that may arise must be paid.

It is not unusual for a life insurance policy to lapse for nonpayment of premium, particularly when the policyholder is elderly and/or in ill-health. When that happens, the insurance company cannot simply count the days after a missed payment before terminating the policy. The company must follow the rules or the policy remains in force and any subsequent death claim must be paid. Read on to learn about the requirements for terminating an insurance policy due to nonpayment, and call a seasoned Los Angeles life insurance claim denial attorney for help with an insurance claim.

Requirements for a life insurance policy lapse

Life insurance companies must follow certain procedures before they can terminate a policy for nonpayment of premiums in California. Pursuant to California Insurance Code sections 10113.71 and 10113.72:

  • Insurers must provide a 60-day grace period for policyholders to pay overdue premiums. The policy remains in effect during this period.
  • The insurer must mail a notice regarding policy termination at least 30 days prior to the effective date of termination, and within 30 days after the premium is due and unpaid.
  • The notice must be mailed to:
    • The policyholder;
    • A designee named pursuant to Section 10113.72 for an individual life insurance policy; AND
    • A known assignee or other person having interest in the policy, for an individual life insurance policy

Section 10113.72 requires insurers to give policyholders the opportunity to designate someone to receive notice of overdue premiums and potential lapse/termination of the policy. Elderly life insurance holders, for example, can designate their child or other family member to receive notice, so that their policy will not be allowed to lapse even if they forget a payment.

Out-of-state insurance companies break the rules

Different states have different laws that pertain to how insurance companies must act. California has enacted laws that are more protective of insured people than many other states. For example, in California, insurers are required to respond to any communications concerning a claim that “reasonably suggests a response is expected,” and must do so within 15 days at the latest. Insurers cannot simply ignore policyholder questions or complaints. Likewise, insurers must follow the rules for policy lapse as explained above.

Insured parties in California are entitled to the benefits of California law, even if the insurance company is based elsewhere. Many insurance companies will let a policy lapse without following California law. For example, many insurers will cancel a policy after a 30-day grace period, instead of waiting the full 60 days required by California law. Insurers may fail to send the required notice within a month of the premium due date or far enough in advance of the policy termination date.

Gianelli & Morris recently filed a lawsuit on behalf of our clients and all other policyholders who were wrongfully denied life insurance coverage by Northwestern Mutual. As explained in our complaint, when a company like Northwestern Mutual fails to follow California law and terminates a policy without adhering to California’s requirements, the policy termination is both unlawful and an unfair business practice, and the beneficiary is entitled the life insurance benefit under the policy. Talk to a knowledgeable life insurance coverage denial attorney about your claims if your life insurance policy was unlawfully terminated or your death claim was improperly denied.

Call for help if your life insurance claim was wrongfully denied in California because of lapse.

If your life insurance policy was unlawfully allowed to lapse, if your claim has been wrongfully denied, or if you are dealing with other insurance issues in California, fight for the coverage you are owed with the help of the experienced and detail-oriented Los Angeles insurance claim denial lawyers at Gianelli & Morris for a free consultation at 213-489-1600.

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