The most common reason people buy life insurance is to help protect their loved one’s well-being after they are gone. Choosing a beneficiary is a major part of the life insurance process as it designates the person or people who should receive financial benefits after the policyholder’s death. Insurance companies must release life insurance funds to the primary beneficiary as outlined, but sometimes this decision is called into question.
Former spouses, children, and other family members who believe they are the rightful beneficiary might contest a life insurance policy’s beneficiary after the insured’s death. Anyone can legally challenge a life insurance policy if they believe they should be the beneficiary of the policyholder’s life insurance proceeds and have a valid claim to initiate a dispute.
Removing a beneficiary from a life insurance policy is complicated; only the court can overturn the policyholder’s decision. Wallace Law is a seasoned insurance dispute law firm with experience handling life insurance dispute cases. We can help you understand the life insurance process and how to file a lawsuit to recover the proceeds.
What Does Life Insurance Cover?
Life insurance is designed to provide a death benefit, or a large sum of money, to your selected beneficiaries—like children, a spouse, or other family members—after your death. It ensures your loved ones have financial security when you are gone and helps them pay for funeral and past medical expenses, as well as future living costs.
Life insurance covers certain circumstances, such as:
- Natural causes include heart attack, cancer, infection, kidney failure, stroke, or old age.
- Accidents resulting in death, such as car crashes, slips and falls, machinery accidents, etc.
- Illnesses like Parkinson’s or Alzheimer’s, stroke, heart attack, certain types of cancer, and multiple sclerosis.
- Murder (in most cases)
- Suicide (typically after a contestability period of two years, but this can vary between states and types of life insurance policy)
Life insurance companies may deny a claim if the policyholder lied on the application or participated in risky activities. Beyond that, an expired policy or a murder caused by the beneficiary can result in a denied claim. It is always essential to review the terms and conditions of the policy so there are no financial surprises later.
The policyholder should make it as easy as possible for the beneficiary or beneficiaries to inherit the money so there is no confusion.
Who is Entitled to Life Insurance Proceeds?
Life insurance is a legally binding contract. The proceeds are released to the named beneficiary or beneficiaries according to the life insurance policy, not a person’s will.
This is often a misconception. The beneficiary must file a claim when the policyholder dies to receive a payout, as they are not automatically distributed upon death. Most policies require beneficiaries to submit a claim form, a copy of the policy, and a certified copy of the death certificate.
There can be one beneficiary or more. Beneficiaries cannot be an entity like a charity, family trust, or even a business. Insurance companies must release funds to the primary or contingent beneficiary as a backup if the primary beneficiary dies.
However, there may be some situations where a non-beneficiary can contest the proceeds if:
- A former spouse is named the beneficiary, and the policy was never updated after the divorce.
- The policyholder tried to change the beneficiary but did not complete the step.
- The mental health of the policyholder was in question when they named the beneficiary.
- The life insurance form was not executed properly and is not valid.
- The policy was filed under fraudulent circumstances or because of undue influence or coercion.
- The beneficiary is disqualified because they caused the insured’s death.
There are usually no stipulations or conditions on benefit payouts, and the money can be used for living expenses, funeral arrangements, education, retirement savings, vacation, and more.
My Life Insurance Proceeds Are Denied: What Next?
Life insurance companies only sometimes fulfill their contractual obligations. This is also known as bad faith practices, or intentional actions insurers use to deny beneficiaries a payout so they can profit instead.
It might be hard to distinguish between a legitimate or bad faith claim denial. Still, an insurance dispute attorney can assess the situation and determine whether the denial was reasonable. If it wasn’t, they can help a beneficiary recover compensation due to an insurer’s bad faith refusal.
Insurers that act in bad faith must be stopped. Here are some ways a life insurance claims dispute lawyer might help you recover life insurance proceeds:
- Gathering evidence of damages for the insurer’s negligence in processing the claim or refusal to thoroughly investigate the claim.
- Demonstrating a lack of reasonable basis for a claim denial.
- Showing the insurance company misrepresented the contract terms and presented false information.
- Collecting evidence showing a breach of an insurance contract.
- Filing a lawsuit for unethical insurance practices.
Unethical insurance practices are among the top reasons people hire an insurance dispute firm. Wallace Law, a knowledgeable, bad-faith-fighting insurance firm, can help ensure you do not leave any money on the table.
Should I Sue My Insurance Company for Denied Life Insurance Proceeds?
Life insurance policies are meant to alleviate some financial stress after a loved one is gone. But what happens when a claim denial or rejection blindsides you and prevents a payout?
Insurance companies might use a variety of strategies to underpay you or deny it altogether. These bad faith tactics might require you to get legal help.
Filing a lawsuit is one path for policyholders, and they can make an informed choice to sue their insurance company using the following methods:
- Review all policy documents and related paperwork, including the contestability period and any other basis on which the carrier usually justifies a delay or denial.
- Keep an organized record of any communication with the insurance company, including emails, written notices, rejections, or internal appeals.
- Gather evidence, such as email or written correspondence with the insurance company and its agents.
- Pursue legal advice and consult an experienced life insurance dispute attorney to assess the validity of your claim, explore alternative dispute resolution methods, and review the statute of limitations.
Speak with an experienced insurance dispute firm if you believe you are entitled to life insurance proceeds and are struggling to get your claim paid. Wallace Law can investigate the facts and history of the disagreement and handle communication and any negotiation with your insurance company and their counsel so you do not have to.
When Should I Contact a Life Insurance Dispute Attorney?
Bad faith claims practices allow insurers to maximize profits while beneficiaries pay the price and do not get their rightful proceeds.
Examples of bad faith claim practices include: dragging out or stalling claims, avoiding communication with the designated beneficiaries, unexplained denials or rejections, and other similar situations.
In other cases, insurance companies might even use targeted and unjustified tactics such as the beneficiary’s immigration status, tax filing, citizenship status, or past criminal history to deny a payout without reasonable cause.
The laws regarding life insurance and the probability of suing for life insurance funds largely depend on the relevant state’s laws and the case’s specific circumstances. A life insurance dispute attorney can help you determine if you have a valid claim and if there is enough proof of bad faith behavior to file a lawsuit.
For these reasons, it is essential to consult a life insurance dispute attorney to understand if you may be entitled to life insurance proceeds. Wallace Law has recovered hundreds of thousands of dollars for clients who have experienced underpaid, denied, or rejected claims.
Speak to an Experienced Life Insurance Dispute Attorney
Insurance disputes are not pretty, especially when it involves death and grief. It is already a challenging time for everyone involved, and the stress of fighting a big life insurance company for money is the last thing you need. Thankfully there is a better way, and it starts with Wallace Law.
Justin Wallace, owner and experienced insurance dispute attorney, has helped hundreds of people fight denied, delayed, and underpaid claims. Our firm is known for taking on tough insurance companies and fighting unethical business practices that hurt policyholders daily. It is in our blood to challenge the industry status quo and recover funds for people and families who really need it.
We know how hopeless it can feel when you are up against a big company with power, money, and resources you do not have. Our team wants to help more people fight and win unjust insurance claims practices.
Change your future today and contact our firm for a free case evaluation. Remember, we do not get paid unless we win!