How Can a Life Insurance Company Deny Your Claim due to Lapse of Coverage?
Life insurance companies, like all insurance providers, are constantly looking for any reason to limit a payout or deny a claim. If they cannot find a justification under the language of the policy to deny a claim, they might look for a reason to invalidate the policy itself. They may point to the life insurance application and try to find a material misrepresentation, or they may claim that the policyholder failed to pay their premium and thus the policy has lapsed. Some life insurers such as John Hancock have been known to purposefully let policies lapse in order to avoid payouts. Read on to learn about claim denial based on lapsed coverage and how to respond. For help obtaining the life insurance benefits you are owed, call a dedicated and trial-ready Los Angeles life insurance denial attorney.
Denial for Lapsed Coverage
Lapsed coverage is one of the most common ways in which life insurance providers seek to deny claims. When a policyholder fails to pay their premiums on time, the insurance company can assert that the policy has been forfeited. A lapsed policy means that the beneficiaries are not eligible for death benefits, and the policy is forfeited.
Time is a Factor
Failing to pay a premium on the day it is due is generally not sufficient grounds for an insurance provider to let the policy lapse. Most states provide a grace period for policyholders to come forward with an overdue payment and save the policy from lapsing. In California, the grace period is 30 days. This means that if the policyholder or whoever is responsible for paying has missed their premium, they have 30 days from the premium due date to correct the missed payment without incurring a penalty.
If more than 30 days have passed, you might still be able to reinstate the life insurance policy. Talk to your insurance agent and a seasoned insurance denial attorney to discuss your options. Be aware that reinstatement may restart the two-year contestability period, meaning that a material misrepresentation in the application could be grounds for denial if the policyholder dies within two years of the reinstatement.
Notably, the policy remains active for the duration of the grace period, even after a missed payment. If the policyholder dies within the 30-day grace period, then beneficiaries are still entitled to death benefits. The policy remained active under California law, so the insurance provider cannot deny the claim on the grounds of a lapsed policy. Unfortunately, for a term life insurance policy, if the policyholder dies after the grace period, then the beneficiaries may not receive their benefits. A lapse in payment of a whole or permanent life policy may, however, present different possibilities. Discuss your policy and your claims with a knowledgeable life insurance attorney to review your options.
Let Our California Insurance Bad Faith Lawyers Fight For You
If you’ve been the victim of a wrongful claim denial or bad faith rejection by a California life insurance provider, get the help you can trust from the passionate and professional Los Angeles insurance bad faith lawyers at Gianelli & Morris by contacting them for a free consultation at 213-489-1600.