Someone in Dallas, Fort Worth, Grand Prairie, Mesquite, Arlington, Cleburne, Aledo, Weatherford, or anywhere else in Texas, purchases a life insurancepolicy. They expect the policy benefits to be paid when the insured passes away. But that does not always happen.
The Los Angeles Times ran an article on November 21, 2010, titled “Flaws Can Cancel Life Insurance – After Death.” The article is written by Lisa Girion and Sandra Poindexter.
This article has tells of three examples where someone takes out a lifeinsurance policy and then when a claim for benefits is turned in to the insurance company the company cancels the policy without paying the benefits.
In one case, American General Life Insurance Company sold a policy to Ian Weissberger. The policy was sold to Ian with the marketing theme that its policies are protection for “the hopes and dreams of American families.” Ian took this promise to heart during his losing battle with Lou Gehrig’s desease.
When Ian died in 2005, American General cancelled the policy. His premiums were paid up. There was no foul play suspected. The beneficiary, his wife Sheila, was the uncontested beneficiary and Ians’ illness had not been diagnosed til months after the policy was taken out.
American General‘s reason for cancelling the policy was that Ian’sapplication for coverage was incomplete because he had failed to disclose conditions, including bipolar disorder and pulmonary disease, that, according to his doctors, he did not have.
Sheila lost her house and many other things before reaching a settlement with American General.
What happened to Sheila was not unusual. The claims of thousands of beneficiaries are denied or disputed every year. There were more than 5,000 last year alone and many were for allegedly flawed applications.
According to the National Association of Insurance Commissioners, the amount of money life insurers withheld from beneficiaries has more than doubled over the last decade even as policy sales went down.
Insurance companies can dispute claims for a number of legitimate reasons. These reasons include unpaid premiums, suicide, foul play by the beneficiary, and the number one reason – “material misrepresentation.” That’s failing to disclose information that insurers deen important in assessing risk, and allows insurers to rescind coverage altogether.
Most states are limited by state law on the time frame for an insurer to rescind a policy. In Texas the governing law is found in the Texas Insurance Code, Section 1101.006. This section says that a life insurance policy in force for two years during the lifetime of the insured is incontestable, except for nonpayment of premiums. Texas has other relevant laws governing the cancellation of insurance policies plus “common law” provisions that come into play.
One thing for certain is that any beneficiary who is having their claim for life insurance benefits denied should seek the advice of an experienced Insurance Law Attorney. The Los Angeles Times article is a good article for reading and gives atleast two other examples of claims being denied that should not have been denied based on the facts presented in the article.