What You Need to Know About the Impact of Inaccuracies in a Life Insurance Application

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

Life insurance often constitutes an indispensable hedge against the premature loss of a family member responsible for earning the bulk of household income.  Whether the policy is purchased on a stand-alone basis or part of a comprehensive estate planning strategy, the benefits will be counted on to allow surviving loved ones to maintain their standard of living.  Although many policyholders recognize that claims under other types of policies often are denied, they are surprised to learn that benefits of a life insurance policy can be denied after the insured has passed away.  This blog post discusses some key facts policyholders and beneficiaries should know about life insurance coverage.

The process of obtaining life insurance varies significantly depending on how the insured obtains the policy.  If your life insurance policy is provided to you by your employer, you typically will not be asked to answer health related questions unless you apply outside the regular enrollment period.  However, the application process and information you must provide is far more complicated when you purchase a life insurance policy directly from an insurance company outside of the employment relationship.  This application process is a potential minefield because omitted or misstated information can result in a denial of benefits when a claim is filed following the death of the insured. 

This situation obviously can be open to abuse because an insurer might accept premium payments for a prolonged period and only investigate the accuracy of information in the application after a claim is filed.  This unethical practice is referred to as “post-claim underwriting.”  Fortunately, Florida and most other states have laws that limit this unfair practice by requiring carriers to raise such objections during the “contestability period.”  In Florida, life insurance policies become incontestable after two years subject to certain exceptions.  Generally, an insurer cannot invalidate a life insurance policy after two years have passed regardless of whether the information provided in the application is true or false with limited exceptions.

When purchasing a life insurance policy, an insured should never lie or withhold relevant information that is responsive to questions on the application because it is never advisable to gamble that you will survive the contestability period.  Although the contestability period is only two years, policyholders do die during this critical period.  The insurance company can investigate the claim and information provided in the application regarding habits, medical treatment, health conditions, and other relevant facts to ensure the underwriting decision was predicated on accurate information.  However, the insurance company is obligated to pay benefits under the policy even if the insured passes away an hour after the policy goes into effect.

Even if an insured makes an inadvertent misrepresentation, this does not necessarily mean the claim will not be covered.  If you make a simple mistake by indicating you are a recreational skier when you are actually an extreme skier under the policy, the insurer might only require that the difference in premiums be paid.  When making a determination whether to deny the claim, the insurer will consider factors like the blatancy of the misrepresentation and the size of the claim.

You can reach Miami Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

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