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Key takeaways
- Life insurance companies pay the vast majority claims, but there are a few reasons why they can deny them.
- The policy might not pay out during the first two years if you made mistakes, lied or left out information on your application.
- The policy might exclude coverage for certain risky activities or occupations, if permitted by state law, but exclusions can vary by insurer.
When you buy life insurance, you expect the death benefit to go to your beneficiaries if you die while the coverage is in force. Even though life insurance companies paid more than 99% of claims they received in 2024, according to the American Council of Life Insurers (ACLI), there are some reasons why a claim can be denied.
It’s important to understand what your policy excludes and how to avoid claim problems so your beneficiaries can get their money as promptly as possible.
When life insurance typically pays out and when claims are delayed
Life insurance companies generally pay out death benefits within 30 days after the life insurance claim is submitted, according to the ACLI. But it might take longer under certain circumstances, such as the following.
Death during the contestability period
If you die within the first two years of the policy, known as the contestability period, the insurer can take extra steps to verify the information in your application.
This could delay the claims process. If the insurer finds that you left out information that would have affected your rate or application approval, the company can deny the claim or adjust the death benefit amount.
Death by homicide
Life insurance policies pay out if the cause of death is homicide—unless the beneficiary of the policy committed the homicide. State laws vary, but generally insurers will not pay claims to a beneficiary who killed the insured person.
Investigation into the cause of death
If the life insurance company needs to investigate the cause of death to ensure it’s not excluded from coverage, the claim can be delayed. For example, the insurer might need to investigate if your death is suspected suicide within the first two years the policy was in force or if you might have died while committing a crime. Activities that are excluded from coverage, including death while committing a crime, can vary by insurer and state.
Paperwork delays
A claim can be delayed if the life insurance beneficiary has not submitted the required paperwork, such as a certified death certificate. “Missing or incomplete documents are one of the most common reasons for delays,” says Carrie Haughawout, senior vice president of life insurance and regulatory policy at the ACLI.
Beneficiary disputes
Life insurance companies are legally required to pay only the beneficiaries listed on the policy documents, regardless of what a will or other documents say. But a dispute about who should receive the death benefit can lead to payout delays. In these cases, the insurer might deposit the money with the court until the legal issues are resolved, says Steve Parrish, professor of practice, retirement planning at the American College of Financial Services.
Common reasons why life insurance won’t pay out
If a life insurance claim is rejected, it can be due to one of the following reasons.
Misrepresentation found during the contestability period
If you die during the two-year contestability period, an insurance company can deny a claim if it finds mistakes or fraud on your life insurance application that would have affected the insurer’s risk—also known as “material misrepresentation.”
“During those first two years, a material misrepresentation could lead to denial. It doesn’t have to be intentional fraud if the information would have affected underwriting,” says Haughawout.
If you made a small error that would have affected your rates but not caused a rejection—such as transposing numbers in your birth date—the insurer might adjust the death benefit rather than deny the claim, says Patti DeWitt, vice president of member services at MIB, a resource insurers use to confidentially share applicant information with one another.
Lapsed policy
The insurer will deny a claim on a policy that has lapsed. Life insurance policies typically lapse if a premium is due and remains unpaid beyond the end of the policy’s grace period—usually 30 or 31 days, depending on the company and state law.
Suicide within two years
Life insurance policies generally exclude death by suicide within the first two years, although a few states limit this restriction to one year. Instead of the death benefit, the beneficiary will generally receive a refund of policy premiums paid prior to the insured person’s death.
Homicide by the beneficiary
A beneficiary can be denied a life insurance claim if they killed the insured person. The “slayer rule” prevents a person from profiting from a crime they committed. “If you’re the beneficiary and you kill the insured, they’re not going to pay, and often it’s state law,” says Parrish.
If the primary beneficiary is disqualified, then the death benefit can go to the contingent beneficiary or the insured’s estate, depending on state law.
Hazardous activities or occupations and other exclusions
Some life insurance policies add an exclusion for certain hazardous activities—usually if you stated on the application that you participate frequently. For example, an insurer might add an exclusion for skydiving, private aviation, scuba diving or auto racing if you state on your application that you frequently participate in that activity.
Some policies might exclude death in a war zone or death while committing a crime. It’s important to look at the exclusions section before buying a life insurance policy to find out about situations where the policy won’t pay out.
For example, in Wisconsin insurers are allowed to exclude deaths involving drug overdoses, extreme sports or hobbies, high-risk occupations or if the insured person was killed while participating in criminal activity, and insurers might also exclude deaths resulting from war or military action, says Sarah Smith, a spokesperson for the Wisconsin Office of the Commissioner of Insurance.
But some life insurance companies might not include all of these life insurance exclusions. For example, “The war hazard one is much less common than it used to be, and some states have banned it,” says Parrish. Instead, insurers ask about these risks up front and might charge extra if you have a risky hobby or occupation. Some will sell life insurance for servicemembers who are about to be deployed, while others will not.
Additionally, some life insurers have started doing further research to help them feel more comfortable about setting higher rates based on risky activities rather than doing exclusions. “I think you see less exclusions and you see more companies’ ability to accommodate them at a cost,” says Kristin Cook, senior vice president of life underwriting and business development for National Life Group.
Fraud
After the two-year contestability period, insurers can’t deny a claim for most mistakes on your application, but they can still deny a payout if there was outright fraud on your life insurance application.
“If there was true egregious misrepresentation that was proven to be intentional at the time of the application, or a known history that was repeatedly omitted, or impersonation—those kinds of situations—fraud that’s significant, that would exceed the contestability period,” says DeWitt.
