Life Insurance Beneficiaries Need to Be Wary of Potential Traps

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Life insurance is a form of financial security and estate planning that can have a vital impact on the future of a family.  If beneficiaries are confronted with bad faith practices by an insurance company, the failure to pay benefits under the policy in a time manner can have a devastating financial impact.  Sometimes the best way to understand the hardships created by an insurance carrier that fails to treat its policyholder or policy beneficiaries fairly is to consider an actual victim of such bad faith practices.

This example involves the daughter-in-law of a man who built a successful HVAC company and used careful estate planning to ensure all of his family members would be well provided for when he passed away.  The man was pre-deceased by his wife, so the insured distributed his bank accounts, life insurance policies, property, annuities and essentially all of his assets to family members.  The objective of his estate plan was to have everything smoothly transfer to his surviving loved ones without any disputes.

Prior to the insured’s death, his daughter-in-law became focused on the care of a child with a serious illness.  Because she was distracted by caring for her dying child, the daughter-in-law fell behind on some paperwork and failed to pay certain bills.  One of the bills she failed to pay was the premium on her father-in-law’s life insurance.  The insurance had originally been purchased more than seven years earlier and all prior premium payments were made on time. 

When the daughter-in-law sought to reinstate the policy, she was told that all that she needed to do was complete and submit a reinstatement form.  However, she was not informed by the insurance company that there would be a two-year waiting period before any claims could be submitted and paid to a beneficiary under the policy.  The insured had developed cancer during the period that the life insurance policy was in place, but this was a non-issue if the premiums were paid on time.  The insurance company never indicated that the reinstatement would be subject to deniability.

Four months after the policy was reinstated, the insured passed away.  Predictably, the insurance company denied the claim which put the daughter-in-law at-risk for losing the business and other property that had been transferred to her by her father-in-law.

In denying the claim, the insurance company wrote to the daughter-in-law: “Pursuant to state law, life insurance carriers review any claim that is filed within two years of the date the policy was originally issued or the date the policy was reinstated.  If during the review it is discovered that there were material misrepresentations regarding medical or other relevant information that would have prevented the life insurance carrier from originally issuing the policy or reinstating the policy, then the claim is denied.”

If you have questions about Miami-Dade insurance claims, you are welcome to contact my Miami life insurance claims law firm.  My law firm represents policyholders in claims disputes in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

Be the first to comment!
Post a Comment