More often than not, life insurers make good on policies, paying $38 billion in death benefits on individual policies last year. However, there are claims of thousands of beneficiaries that are denied or disputed every year — more than 5,000 last year alone — many for allegedly flawed applications, a Times review found. If a policy is less than 2 years old, companies may dispute the claim, and thousands were denied last year. Overall, the amount of money life insurers withheld from beneficiaries has more than doubled over the last decade, to $372 million last year, even as policy sales went down.
Insurers can dispute claims for a number of legitimate reasons — unpaid premiums, suicide, foul play by the beneficiary. But the No. 1 reason, accounting for about two thirds of disputes last year, is “material misrepresentation.” That’s failing to disclose information that insurers deem important in assessing risk, and it allows insurers to deny coverage altogether.
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