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Reasons why a claim is denied

Feb 9, 2021 4 Minute Read

Worried that your life insurance policy won’t pay out when your family needs it most? First, take a deep breath.

It’s rare for life insurance claim denials to happen. If you bought your life insurance from a reputable company and are keeping up with payments, there’s rarely a need to worry.

That said, there are a few situations where an insurance company may contest or delay payment on a claim. Knowing what these situations are now can help you make sure the money is there for your family when they need it.

What are reasons life insurance won’t pay out?

So when does life insurance not pay your claim? The main reasons include:

  • You weren’t honest on your application. This is the biggest reason life insurance won’t payout– and a good reminder of why it pays to tell the truth. Life insurance policies have a contestability period that lasts one to two years after you purchase the policy. If you die during that time, the insurer has the right to investigate your family’s life insurance claim. If it comes out that you omitted something or have a serious illness you didn’t disclose, an insurer can decline to pay your claim. In most cases, the insurer would return the premiums you paid to your family, but your beneficiaries would not receive a cash death benefit payout from the policy.
  • In cases of suicide. Most life insurance policies include a suicide exclusion, which means the insurer does not have to pay claims because of death by suicide during a limited time period, typically two years. If you die by suicide during that period, the insurer will return the premiums to your family. If you or someone you know is having suicidal thoughts, please reach out to the National Suicide Prevention Lifeline at (800) 273-8255.
  • If you fall behind on payments. If your payments aren’t current, your family likely won’t be eligible for a payout. Call your insurer if you are having trouble making payments, since many can help you work out a payment plan.
  • If your term policy has expired. This one may seem obvious, but it’s worth repeating: term life insurance lasts for a set period of time and will eventually expire. If you reach the end of your term and still need coverage, act quickly so you don’t have a gap in financial protection. We recommend using a life insurance calculator to figure out the appropriate amount of coverage.

How Do Life Insurance Companies Pay Out Claims?

When you buy life insurance, make sure your family knows about the policy and how to file a claim if you die. You definitely don’t want the money to go unclaimed. There’s no set time for receiving the payout, but it generally comes quickly. Life insurance companies are motivated to pay claims promptly, since they need to pay interest on the money if they hold it too long.

If you were honest on the application and paid your premiums on time, it’s unlikely that there will be any issues with life insurance not paying out. That said, make sure you’re in the know when it comes to your life insurance. It’s always a good idea to review your policy to see if there are other types of exclusions that could impact the payment of a claim.

Still have questions?

We’re here to help. eFinancial works with top-rated life insurance companies to help you find the right coverage for you and your family. Call us or start your quote online today.


At eFinancial, our goal is to make life insurance simple, affordable, and understandable for everyday families. This content is intended for educational purposes only. Each post is carefully fact-checked, reviewed and updated regularly to ensure the information is as relevant as possible.