This guide is general information, not insurance or legal advice. Coverage, prices and rules vary by insurer and by state, so read your policy documents and check with your insurer, a licensed agent or your state’s department of insurance before you decide.
Key facts
- Life insurance claims are rarely denied. When they are, the usual causes are a lapsed policy or inaccurate information given on the application.
- The contestability period, typically the first two years of a policy, lets the insurer review a claim for application errors. After it ends, claims are rarely challenged.
- A lapsed policy is a common cause of denied claims, and reinstating a policy after a lapse can restart the contestability period.
- How a payout is delivered follows the policy’s terms, so beneficiary designations deserve a review after major life changes.
- Beneficiaries can ask the insurer which payout options a policy offers, and a delayed claim usually means a review or missing paperwork, not a denial.
Life insurance pays out far more often than most people assume. Insurers paid nearly $80 billion in death benefits in 2018, up from $77 billion the year before, and denied claims are the exception rather than the rule. Even so, the mistakes that do cause trouble are predictable, and nearly all of them can be prevented while the policyholder is still alive. Here are the misconceptions we see most often, and what to do instead.
Mistake 1: Assuming the Payout Always Arrives as One Check
Many people picture the insurer handing over a single check shortly after the funeral. A single payment may well be one option, but policies can allow more than one way to receive the money, and what is actually available depends on the policy and the insurer.
The mistake is that beneficiaries often learn about these choices at the worst possible time, in the days right after a death, when they are in no condition to weigh financial decisions.
What to do instead: policyholders can ask the insurer which payout options the policy offers and share that with the people named as beneficiaries. Beneficiaries, in turn, do not have to decide anything on the spot. If an option other than a single payment sounds appealing, take time to understand it and talk it through with a qualified financial professional first.
Mistake 2: Assuming Any Cause of Death Triggers a Payment
Life insurance covers most causes of death, and claims are rarely denied. But “most” is not “all.” Policies can carry specific exclusions, meaning causes of death the policy does not pay for, and the details are spelled out in the policy documents rather than in advertisements or summaries.
The mistake is assuming coverage is universal and never reading the exclusions. By the time a beneficiary discovers one, there is nothing left to do about it.
What to do instead: read the exclusions section of a policy before you buy it, and ask the insurer to explain anything unclear in writing. If you already own a policy and cannot find the exclusions, request a complete copy of the policy from the insurer and review it with your insurance professional.
Mistake 3: Ignoring the Contestability Period
Most policies include a contestability period, typically the first two years after the policy takes effect. If the policyholder dies during that window, the insurer has the right to investigate the claim and confirm that the application was accurate. That review can include medical records, autopsy reports and other documents.
Claims most often run into trouble during this period for a handful of reasons: material misrepresentation on the application, fraud, unpaid premiums, or a specific policy exclusion. A material misrepresentation is a false or omitted answer that would have affected whether the insurer issued the policy at all, or what it charged.
When an investigation does turn up a problem during the contestability period, the outcome is usually one of three things. The insurer may pay the claim in full, adjust the payout to reflect the premium the policyholder should have been paying, or deny the payout and return the premiums the policyholder paid along the way.
If the policyholder dies after the contestability period ends, the claim generally can no longer be denied for application errors unless fraud is proven. Honest applicants should treat this period as a non-event. Fill in every answer honestly, and if a question on the application seems unclear, ask the insurer to clarify before you answer.
Check this
A contestability period is not the same as a limited benefit period. Some policies, especially those issued without health questions, include a waiting period, sometimes two years, during which deaths are not paid at the full benefit amount. The contestability period concerns the accuracy of the application; a limited benefit period affects when full coverage becomes available. Check which provision your policy includes.
Mistake 4: Letting the Policy Lapse
A denied claim often has nothing to do with how someone died. Policies that have lapsed because premiums went unpaid are a common thread, and that can happen for remarkably mundane reasons: a move that sends billing notices to an old address, an expired card that silently breaks an automatic payment, or a policyholder who assumed someone else was handling it.
A lapse carries a second consequence that surprises people. The contestability period can begin again when a policy is reinstated after a lapse, which means a claim filed after reinstatement may be reviewed as though the policy were new.
What to do instead: set up automatic payments where the insurer allows it, and keep the insurer’s records current with your address and payment details. If a policy does lapse, contact the insurer promptly to ask about reinstatement. The rules vary, so the sooner you call, the more options you are likely to have.
Mistake 5: Assuming the Paperwork on File Still Matches Real Life
Who receives the payout is governed by the policy’s own terms, which makes the beneficiary designation one of the most consequential lines in the entire document. The mistake is assuming estate documents take care of everything, or that a designation written years ago still reflects the policyholder’s wishes. A designation can be older still than a will, especially on a policy bought young or through an employer decades earlier.
An out-of-date designation is easy to overlook precisely because the policy sits untouched. Premiums get paid, the coverage stays in force, and the paperwork quietly stops matching the policyholder’s life.
What to do instead: look over the beneficiary designations whenever circumstances change, for example after a wedding, a divorce, the arrival of a child or the loss of a close relative. If the designation no longer fits, ask the insurer how to update it and whether the policy allows naming a backup beneficiary. Our guide on life insurance beneficiaries covers how to name them and keep them current.
Mistake 6: Expecting Payment Immediately, Then Panicking
Beneficiaries are often surprised that a claim takes time to process, and surprise turns to worry when weeks pass without news. In most cases there is a routine explanation. Claims stall over incomplete paperwork, a death certificate that has not arrived, unclear beneficiary information, or simply the volume of claims an insurer is handling.
The review is more involved when the death falls inside the contestability period, since the insurer may need to gather records before it can pay. A delay is not a denial. Claims are rarely denied, and a delay usually means the insurer is still assembling what it needs.
What to do instead: file the claim promptly, submit everything the insurer asks for, and keep copies of every document. Write down the names and phone numbers of everyone you speak with, and follow up in writing if the process goes quiet.
Mistake 7: Not Knowing What to Do First
The days after a death are chaotic, and beneficiaries often lose time because they do not know where to start. A short sequence keeps things moving:
- Get several certified copies of the death certificate. The insurer will need one with the claim form, and other institutions will want copies too.
- Locate the policy. Check the person’s files and mail, contact the benefits department at any employer if coverage was through work, and ask your state insurance department what help is available if no policy turns up.
- Contact the insurer, ask exactly what it needs to process the claim, and ask about payout options at the same time.
- Keep records of everything you submit and everyone you speak with.
If the coverage was through an employer, it helps to know that group coverage works differently from an individual policy in a few ways. Our article on group vs. individual life insurance explains the difference.
None of these mistakes is hard to avoid once you know they exist. Answer the application honestly, pay the premiums on time, keep beneficiary designations current, and make sure the people you name know a policy exists and where the paperwork is. If you are still deciding what kind of policy fits your situation, our comparison of term vs. whole life insurance lays out the tradeoffs, and our guide to how much life insurance you need walks through the math behind the coverage amount.
Questions we hear
How long is the contestability period?
It typically lasts two years from the date the policy takes effect, though specifics vary by policy. If the policyholder dies during that window, the insurer can investigate whether the application was accurate before paying.
What happens if the insurer finds a mistake on the application?
The insurer may pay the claim in full, adjust the payout to reflect the premium the policyholder should have paid, or deny the payout and return the premiums the policyholder paid.
How do beneficiary designations affect who gets paid?
The payout follows the terms of the policy, so who is named as beneficiary matters. Review the designation with the insurer after major life changes such as a marriage, a divorce or the birth of a child.
Why would a life insurance claim be delayed?
Common reasons include incomplete paperwork, a missing death certificate, unclear beneficiary information, or a death during the contestability period, which can require the insurer to gather records before paying.