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5 Common Reasons Why a Beneficiary Could Be Denied Death Benefits

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One of the most caring things you can do for your family is ensure financial security after your death. For most, this is done through a life insurance policy. In most cases, the death benefit is paid without any issues. Unfortunately, there are situations where the beneficiary is denied pay out, leaving them both financially and emotionally stressed.

Here we explain the most common mistakes consumers make that lead to the denial of a life insurance claim:

1) Material Misrepresentation

Once you enter into your contract/life insurance policy with the insurance company, your two year contestability periods begins. If you pass away during that time, the claims representative will conduct an investigation to ensure everything on your insurance application was truthful and that nothing was left out. If you lied or omitted on your application, the carrier has the right to refuse pay out, regardless of the cause of death.
Once you’ve survived the contestability period, the beneficiary’s risk of being denied due to misrepresentation is significantly reduced.

2) Policy Lapse Due to Nonpayment of Premiums

This is probably the most common reason for claim denial. While premium payment is required for the policy to remain in force, there are times when nonpayment of premium isn’t a sufficient reason for denying a claim. Beneficiaries who are denied for this reason should confirm with the carrier that premium-due notices were sent in a timely manner, to the correct address, and that the notice very clearly warned the insured that a policy lapse was imminent.

3) The Type of Death Isn’t Covered

Historically, life insurance carriers excluded death from dangerous activities such as skydiving, war, or scuba diving. While this is no longer the norm, many carriers will still exclude death by suicide. Many carriers now waive that exclusion once the policy’s contestability period runs out.

4)  Beneficiary Designation Not on File

When filling out the application, be sure to designate both a primary and secondary beneficiary. If no one is designated, your loved one could be denied pay out. Every policy has provisions regarding who should be paid out in this situation, as do most states. While a claim will, eventually, be paid, non-designation of a beneficiary will, at the very least, prolong the process.

5) Post-Divorce Beneficiary Changes

In many divorce cases involving minor children, life insurance is ordered by the court. The ex-spouse is to be listed as the beneficiary on the policy and must be maintained until the minor child is of age. If the parent later violates this court order by changing beneficiaries, the new beneficiary could be denied coverage.

In a perfect world, every life insurance claim would be paid out without delay or question. If you find yourself in this unfortunate situation, be sure to consult with a professional immediately. Make sure you understand your legal rights and obligations and do not accept the denial without going through the appeals process. More often than not, it’s worth the battle.

7 Steps to Filing a Life Insurance Death Benefit

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The loss of a loved one is always a difficult and stressful time. In addition to going through the stages of grief, we’re often faced with making difficult decisions regarding the deceased’s burial. Bills must still be paid and, oftentimes, financial and legal issues must be addressed.

Fortunately, you and your loved one set up a life insurance policy to help you get through this distressing time. While a part of you might feel uncertain about filing a death benefit claim, keep in mind that the purpose of this policy was to help you cope as you get accustomed to this new normal. The expenses that emerge shortly after a loved one’s death are often significant. Surprisingly, many individuals abandon their loved one’s life insurance policy, leaving over $1 billion in unclaimed life insurance benefits. Don’t put you and your family through additional unnecessary turmoil. File for the benefits due to you.

While the specifics vary slightly from company to company, below are the next steps you must take to file a claim.

1) Find a Copy of the Policy

Hopefully, you’re aware of where the deceased’s life insurance policy is located. If not, nightstands, bookshelves, filing cabinets, and desks are the most common places for storing important papers.

Tip: In many states, safety deposit boxes are sealed immediately after one’s death. To avoid settlement delay, encourage loved ones to avoid storing their policy in a safety deposit box.

2) Check to Ensure There Aren't Any Other Policies

Many employers offer life insurance, accidental death, and dismemberment riders as part of their benefits package. Check with your loved one’s human resources to see if there are any additional policies you weren’t aware of.

Surviving family members are also often entitled to a small burial benefit (or monthly survivor benefits) through Social Security. Additionally, if your loved one was traveling when he/she passed, check with a representative from the credit card that was used to make travel arrangements.

3) Notify the Agent

As soon as you’ve located the policy paperwork, you’ll want to notify the insurance company. If an independent agent sold you the policy, consider contacting them directly. She can act as an intermediary with the insurance company, ensuring the process goes smoothly. If the deceased purchased a group life policy through their employer, the human resources department can assist you in filing your claim.

4) Obtain Copies of the Death Certificate

A certified copy of the person’s death certificate is required to file a death benefit claim. This can be obtained within a few weeks of their death, through the vital records department in the state in which he/she resided. The funeral director can assist you in acquiring this information.

5) Request Claim Forms From Insurance Company

Request a copy of the claim forms needed to file for benefits. Review the paperwork carefully and be sure to gather any additional paperwork that may be required.

If you’re unable to fill out the forms or simply do not understand portions of the paperwork, ask your estate attorney or insurance agent for assistance. Each beneficiary will have forms to fill out and sign.

6) How Do You Want Benefits to Be Paid?

There are typically multiple payment options available to beneficiaries. Check with your financial advisor, insurance agent, or estate attorney regarding these options. They can help identify the best possible payout for your unique situation.

7) Submit Completed Forms to Insurance Company

Return your completed forms, along with a certified copy of the death certificate and any other required paperwork, via certified mail or with a request for return receipt. Most states require life insurance benefits be paid within a certain amount of time, but the number of days vary from a few weeks to a few months.

If you’re unsure if your loved one had a life insurance policy, MIB’s policy locator service may help you find the information you need. The American Council of Life Insurers (ACLI) is also a great resource for finding missing information.

The Surviving Spouse’s To-Do List, Part 4: Change of Ownership

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Losing your spouse is one of the most difficult setbacks to overcome. Navigating through the different stages of grief leaves many feeling alone and afraid. This leads to vulnerability and, all too often, the widow(er) becomes the victim of crooks and/or the pressure to make decisions they do not fully understand.

Today, we’re sharing with you Part 4 of our 6-part series: The Surviving Spouse’s To-Do List. Each individual’s situation is unique, so this is meant to serve as a guideline. We urge you to wait before making any life-altering decisions and, of course, seek the advice of a trusted professional when it comes to insurance or financial matters.

Transfer of Ownership

If you are like most married couples, you and your spouse accumulated some assets together throughout the years. You likely also have several bills and policies that are in both your names. You will need to remove your spouse as a named owner/insured, when getting your affairs in order. Again, we urge you to seek legal advice before making any big changes, particularly before the estate has gone through probate. One wrong move could lead to hefty tax implications later.

Below are a few items that should be checked for ownership:

Motorized Vehicles, Recreational Vehicles, & Boats

If there are any vehicles or other assets titled in your spouse’s name only or, if you are jointly listed, they may need to be re-titled out of your spouse’s name. Contact the Department of Motor Vehicles in your state for rules specific to your region.

Credit Cards

If your deceased spouse held credit cards in his/her name only, those cards should be canceled. Typically, those bills will be paid out of the estate.

If you were listed jointly on a credit card, notify the company of your spouse’s recent passing. Ask them to remove her/his name from the account. Payments on these accounts should be made on time to ensure your credit rating doesn’t suffer.

Pro tip: Some consumers experience difficulties when trying to get a new credit card in their name. This typically occurs when all or most of the credit was listed under the spouse’s name only. When applying for a new card, let the lender know that you shared these accounts with your spouse. Do so even if your name was not listed on the account.

Bank Accounts

Joint bank accounts automatically pass on to you, as the surviving spouse. Notify the bank of the recent changes and ask them about the process for retitling and changing the signature card on the account. If you own any stocks or bonds, be sure to notify your financial advisor of your spouse’s passing.

If you spouse held any bank accounts in his/her name only, those assets will have to go through the probate process. Trust accounts are the exception to this rule.

Insurance Policies

Hopefully you have been able to locate the paperwork on any household insurance policies. Auto and homeowners policies will need to be revised to list your name only. Many homeowner insurers require a copy of the death certificate, before making any changes.

If you and your family are currently covered under your spouse’s employer-based medical coverage, notify the health insurance representative immediately. In most instances, you should be eligible for continued coverage through COBRA for up to 36 months. There is typically an increase in monthly premium, and you must remain up-to-date on your premiums to continue with this coverage.

Life insurance policies should be reviewed for any necessary changes. If your spouse was the listed beneficiary on a policy, contact your insurance representative to have that modified as soon as possible.

Pro Tip: Some employers allow the surviving spouse to continue with their current policy. Since your current premium is significantly less than COBRA, check with your spouse’s employer to see what their specific rules are.

Safe Deposit Box

While the rules vary from state to state, most safe deposit boxes require a court order to open, when rented in only one name.

Will

If your will provides for property to pass to your spouse, it should be updated. You may want to contact your estate planner for assistance.

General Finances

Like the credit cards, any outstanding debts/bills shared by you and your spouse should be kept in good standing. Anything in your spouse’s name should only be passed on to the executor of the estate, to be paid by the estate.

Do not immediately make permanent significant financial decisions, such as selling your home, moving or changing jobs. You will need some time to consider your situation before you can make these decisions responsibly. If at all possible, do not rush into a decision you may later regret.

As previously mentioned, we urge you to take your time making any significant decisions. Take a moment to grieve, review your current financial situation, and consider where you would like to go, moving forward. Your primary focus should be on healing from this devastating loss.

Stay tuned for Part 5, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

The Surviving Spouse’s To-Do List, Part 3: The Estate

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Over the last few weeks, we’ve detailed the initial steps a widow(er) should take after the loss of their spouse. Part One tackled the paperwork that must be gathered, while Part Two offered advice regarding collecting survivor benefits. This week, we will address the steps regarding handling the will and preparing the estate.

Again, we encourage you to partner with a friend, family member, or trusted professional to assist you in making any necessary decisions during this difficult time. Anything that can wait – leave it until your emotions aren’t quite as high. Allow yourself the time the mourn. There are few things that can’t wait.

Estate Preparation

The first thing you will need to do is contact key people regarding the estate. Hopefully, you and your spouse worked together during the will preparation, so you are familiar with the attorney that drafted the will, as well as the contents of it. Contact the executor of the estate as well as the lawyer. If you are the executor, enlist the help of your estate attorney throughout the estate-settlement process.

Until you’ve had a chance to meet with your estate lawyer, experienced attorneys recommend that you not transfer any of your spouse’s assets into your name. Once you’ve done so, you lose the right to “disclaim” the property. When you “disclaim” property, those assets are transferred directly to your living heirs, protecting those assets from your federal and/or state-tax exemption when you pass away.

Pro tip: Before you agree to work with an attorney, inquire about their fees. Many will agree to a flat fee of a few thousand dollars. There are, however, many that charge based on a percentage of the assets in probate. Depending upon the contents of the estate, this could turn out to be a very large bill.

Probate

The term “probate” refers to the process of distributing the contents of the estate to its named heirs and paying any outstanding debts the deceased had at the time of their death. It generally entails the following:

  • Appointment of an executor of the estate. If a will was never drafted, the court will appoint a personal representative, generally the spouse.
  • Proving the validity of the will.
  • Notification of probate to all heirs, beneficiaries, and creditors.
  • Disposal of the estate, according to the contents of the will or state law.

Any assets that are jointly owned by the deceased and another party are excluded from the probate proceedings. Proceeds from an IRA and life insurance policy are also excluded when distributed directly to the beneficiary.

State and Federal Taxes

You are required to file a federal estate-tax return within nine months of your spouse’s death. State estate taxes and inheritance taxes could have an earlier deadline, so be sure to check the laws on a local level.

Summary of taxes that should be addressed and paid:

Federal Estate Tax: Estate taxes are typically only due on estates in excess of the unified credit exemption. The exemption amount changes each year, so check with your estate attorney for the most up-to-date information.

State Death Taxes: While the laws on this vary from state to state, beneficiaries are typically required to file a state death tax form or state estate and pay state death taxes. Taxes due are paid to the state in which the deceased resided upon their death and are dispersed directly from the estate.

State Inheritance Taxes: While many states do not require an inheritance tax, it is required in some states. Again, speak with an attorney or trusted tax representative regarding local law.

Federal and State Income Taxes: Taxes are due on the normal filing date of the following year. An extension can be requested if necessary.

Pro Tip: Save all receipts that are relevant to the estate, particularly if the estate’s value exceeds the estate-tax exemption. Funeral and post-funeral expenses are a legitimate write-off.

This is also a good time to revisit the subject of who will make financial and healthcare decisions on your behalf, should something happen to you. If your spouse was your representative, you will need to designate a new agent for your healthcare power of attorney, healthcare directive, and/or financial power of attorney.

Stay tuned for Part 4, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

The Surviving Spouse’s To-Do List, Part 2: Collect Benefits

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Last week, we started our six-part series – The Surviving Spouse’s To-Do List, detailing the initial items a widow(er) should do after the loss of their spouse. While we encourage you to leave any big decisions for after you have had a moment to grieve, there are some things you will need to start doing in the months to follow.

Last week was about gathering paperwork. This week, it’s time to start thinking about what you need to do to collect survivor benefits. Let’s get started.

Enlist Help

Whether your spouse had a long battle with an illness or his/her death was unexpected, this is an incredibly difficult time in your life. To help you with the tasks and decisions that lie ahead, consider putting together a "financial support team." This could include a close family member or friend, a financial advisor, accountant, or attorney. Just make sure your team is comprised of individuals who understand and respect your views and can be trusted to help you make sound financial decisions.

Social Security

A widow(er) of full retirement age is entitled to 100% of their deceased spouse’s Social Security benefit. You can collect this survivor benefit before you reach retirement age, but you will only receive a percentage of the total benefit. If you were collecting spousal benefit prior to your spouse’s death, the survival benefit will take its place. Individuals who are younger than full retirement age will lose all the spousal benefit if they decide to wait until they are fully eligible. For more information or to view your (or your spouse’s) annual Social Security statement, log on to the Social Security website.

Life Insurance

If your spouse carried a life insurance policy, you will need to file a claim to receive the death benefit. You will need a copy of the death certificate to begin the process.

When filing the claim, you’ll be given some paperwork to review and sign. Read this document carefully, as you will need to make a decision regarding how you would like the funds dispersed. There are benefits and downsides to each option, so seek the advice of a financial advisor or attorney if you don’t fully understand your choices.

If you cannot find the paperwork for your spouse’s life insurance policy, go through your bank statements or check registers to see if any payments were made to an insurance carrier. It’s also a good idea to check with your spouse’s employer and any professional organizations they were a member of. If you are still unable to locate a policy, MIB Solutions' Policy Locator Service can often help find the information needed. Inquire about their fees before enlisting their help.

Employee Benefits

In addition to a life insurance policy, you may have other employee benefits due to you. This could include: unpaid salary, accrued sick leave and vacation, unpaid bonuses, stock, and/or funds from a medical flex spending account.

You will also want to check on pension benefits and your spouse’s 401(k). Notify the pension plan administrator of your spouse’s death as soon as possible. Some pensions reduce the pension’s payment amount once the primary has passed. If this is less than what you are currently receiving, you could be expected to send back any overpayment.

Health insurance is another item to consider. If you were covered under your spouse’s employer plan, speak with the plan administrator to review your options.

Veterans’ Benefits

Spouse’s of veterans are generally eligible to receive burial expense benefits in the amount of $300 and up to $150 towards private cemetery fees. If you wish to have your spouse buried in a national cemetery, this comes at no cost to you.

If, prior to his/her death, you spouse was receiving disability benefits, your family may be entitled to continue those monthly payments. Your regional VA office can help you with any questions you might have.

Stay tuned for Part 3, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.

The Surviving Spouse’s To-Do List, Part 1: Paperwork

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The death of a spouse is one of the most devastating events you will endure in your life. To make matters worse, you are asked to make significant decisions about your loved one’s burial and your financial future. Whether you were the financial decision-maker or not, the stress and sadness felt from this loss can make even the simplest of decisions feel paralyzing.

Our first bit of advice: don’t make any major decisions until you’ve had a moment to catch your breath and adjust to life without your spouse. Financial advisors typically recommend waiting six months to a year before making major changes to your financial portfolio. Trust me, there are a number of items you will be tasked with that should keep you busy in the coming weeks and months. Your primary focus – healing from this devastating loss.

While the next few months should be centered on healing, there are a few decisions you must make to get your affairs in order. Part 1 of our 6-part series addresses the first item on your to-do list – gathering your paperwork. Do not expect to tackle this entire list overnight; it could take months for some of this paperwork to come in. Use this as a guideline as you map out a plan of action for this new life you have suddenly been introduced to.

Gather Your Paperwork

There are a few documents you will need to gather in order to collect your life insurance death benefit, any additional benefits, and to update your estate.

  • Death certificate- Order 15 – 25 copies of the death certificate from the local health department or funeral home. Your life insurance, bank, and financial institutions will require this when claiming benefits or making changes. Certified copies can be purchased through your local health department or the funeral home.
  • Social Security numbers- You will need the Social Security numbers of surviving members of the estate, as well as your deceased spouse’s.
  • Birth certificates- Make sure you have copies of the birth certificate for each dependent family member. Contact the county or state public health offices where each child was born to obtain a copy.
  • Marriage certificates- This is required if you plan to collect any surviving spousal benefits and can be purchased from the County Clerk’s office where the original certificate was issued.
  • Military discharge paperwork- If your spouse was ever discharged from the military, you will need a copy of their discharge paperwork (honorable or dishonorable). A copy can be requested online through the Department of Defense’s National Personnel Record Center.
  • Insurance policies- Gather copies of each insurance policy. Review them for any potential benefits and/or necessary changes.
  • Will- Wills are commonly stored with an attorney, in a safe, or safety deposit box. If you spouse did not have a will, his/her estate is dispersed in accordance with your state’s intestacy law. Any property titled in more than one name will automatically pass to the surviving co-owner.
  • List of assets- Gather a complete list of assets. This should include items in your name, your spouse’s name, and jointly owned.

Unless you took an active role in the day-to-day finances, the paperwork could start to feel overwhelming. Keep your stress level at a minimum by developing a document storage system that is organized and safe, yet out of eyesight. Make notes on the outside of envelopes whenever necessary and keep a running list of all bills. Continue to pay outstanding balances as they arrive, but inquire about any items listed solely in your spouse’s name. Some balances, like federal student loans, are forgiven in the event of the borrower’s death.

Stay tuned for Part 2, where we address the next items on your to-do list. Don’t hesitate to contact us with any questions, at 1- 866-450-2424.