5 Common Reasons Life insurance Claims Are Denied in Canada

Understand your life insurance policy, and avoid this expensive mistake.

8 minute read
Originally published: January 11, 2023

5 Common Reason Life insurance Claims Are Denied in Canada

5 Common Reasons Life insurance Claims Are Denied in Canada

Understand your life insurance policy, and avoid this expensive mistake.

8 minute read
Originally published: January 11, 2023

5 Common Reason Life insurance Claims Are Denied in Canada

Welcome to our blog about 5 common reasons life insurance claims are denied in Canada. With life insurance being such an important part of financial planning for Canadians, we want to provide our readers with all the information they need to understand why claims may be denied and what to do if their claim is denied. We will discuss the common reasons for claims being denied, which can range from misunderstanding to fraud. 

 

In this article:

5 Common Reason Life insurance Claims Are Denied in Canada

Life insurance claims can be denied for a variety of reasons, and the specific reason for a denial can vary depending on the policy and the circumstances of the claim. Some common reasons for a life insurance claim denial include:

Misrepresentation or omission of information: Life insurance policies are typically underwritten based on the information provided by the policyholder at the time the policy is purchased. If the policyholder misrepresents or omits important information, the insurer may have grounds to deny the claim.
Policy lapses or non-payment of premiums: If the policyholder fails to pay premiums on time or allows the policy to lapse, the insurer may deny the claim.
Exclusions in the policy: Some policies may exclude certain types of deaths or circumstances from coverage. For example, some policies may exclude deaths resulting from suicide or hazardous activities.
Misunderstanding of the policy terms: It’s important to carefully read and understand the terms of your life insurance policy to ensure that you are aware of any exclusions or limitations. If the policyholder misunderstands the terms of the policy, the insurer may deny the claim.
Fraud: If the insurer suspects that the policyholder or beneficiary has engaged in fraudulent activity, the claim may be denied.

If your life insurance claim is denied, you may have the option to appeal the decision. It’s a good idea to review the policy and the reasons for the denial and gather any supporting documentation to strengthen your case. You can also consider seeking legal or financial advice to help you navigate.

5 Reason Life insurance Claims Are Denied in Canada

Reason 1: Misrepresentation or omission of information

Life insurance claims can be denied for misrepresentation or omission of information, which means that the policyholder provided false or incomplete information when applying for the policy. Misrepresentation can occur when the policyholder intentionally provides false information or unintentionally provides incorrect information due to a misunderstanding or lack of knowledge.

If the policyholder misrepresents or omits important information on the application, the insurer may have grounds to deny the claim. For example, if the policyholder fails to disclose a pre-existing medical condition or engages in risky activities that are not disclosed on the application, the insurer may consider the policy void and deny the claim. It’s important to be honest and accurate when applying for life insurance and to disclose any relevant information about your health and lifestyle. Providing accurate and complete information can help ensure that you get the coverage you need and that your policy is not later deemed void due to misstated or omitted information. If your life insurance claim is denied due to misrepresentation, you may have the option to appeal the decision. It’s a good idea to review the policy and the reasons for the denial and gather any supporting documentation to strengthen your case. You can also consider seeking legal or financial advice to help you navigate the appeals process.

Reason 2: Policy lapses or non-payment of premiums

Life insurance policies typically require the policyholder to pay premiums on a regular basis to keep the policy in force. If the policyholder fails to pay premiums on time or allows the policy to lapse, the insurer may deny the claim. It’s important to carefully review the terms of your life insurance policy to understand the premium payment requirements and the consequences of non-payment. Some policies may have a grace period during which the policyholder can make up missed premiums, while others may require the policy to be reinstated with evidence of insurability. If your life insurance claim is denied due to a policy lapse or non-payment of premiums, you may have the option to appeal the decision or reinstate the policy. It’s a good idea to review the policy and the reasons for the denial and gather any supporting documentation to strengthen your case. You can also consider seeking legal or financial advice to help you navigate the appeals process or reinstate the policy. It’s important to keep track of your premium payment due dates and make timely payments to avoid a policy lapse and the potential denial of a claim. If you are having difficulty paying premiums, it’s a good idea to contact the insurer and discuss your options. You may be able to modify the policy or make arrangements to catch up on missed premiums.

Reason 3: Exclusions in the policy

Life insurance policies often include exclusions, which are specific types of deaths or circumstances that are not covered by the policy. Exclusions can vary depending on the policy and the insurer, and it’s important to carefully review the exclusions in your policy to understand what is not covered.

Some common exclusions in life insurance policies include:

  • Deaths resulting from suicide: Many policies exclude deaths resulting from suicide or self-inflicted injury within a certain period of time after the policy is issued.
  • Deaths resulting from hazardous activities: Some policies may exclude deaths resulting from participation in certain hazardous activities, such as skydiving or bungee jumping.
  • Deaths resulting from certain medical conditions: Some policies may exclude deaths resulting from certain medical conditions, such as pre-existing conditions or certain diseases.
  • Deaths resulting from war or terrorism: Some policies may exclude deaths resulting from war or terrorism.

If your life insurance claim is denied due to an exclusion in the policy, it’s a good idea to review the policy and the reasons for the denial. Depending on the circumstances, you may have the option to appeal the decision or seek coverage through a different policy. It’s also a good idea to consider seeking legal or financial advice to help you understand your options.

Reason 4: Misunderstanding of the policy terms

It’s important to carefully read and understand the terms of your life insurance policy to ensure that you are aware of any exclusions or limitations. If the policyholder misunderstands the terms of the policy, the insurer may deny the claim. For example, if the policyholder believes that the policy covers deaths resulting from suicide but the policy excludes suicides within a certain period of time after the policy is issued, the claim may be denied. Similarly, if the policyholder believes that the policy covers deaths resulting from a pre-existing medical condition but the policy excludes coverage for pre-existing conditions, the claim may be denied. 

If your life insurance claim is denied due to a misunderstanding of the policy terms, it’s a good idea to review the policy and the reasons for the denial. You may have the option to appeal the decision or seek coverage through a different policy. It’s also a good idea to consider seeking legal or financial advice to help you understand your options. To avoid misunderstandings and potential claim denials, it’s important to carefully read and understand the terms of your life insurance policy and to ask for clarification if you have any questions. It can also be helpful to work with a financial planner or insurance professional who can help you understand the terms of your policy and determine the right coverage for your needs.

Reason 5: Fraud

Life insurance fraud refers to the act of intentionally providing false or misleading information to obtain a life insurance policy or to receive a benefit from a life insurance policy. If the insurer suspects that the policyholder or beneficiary has engaged in fraudulent activity, the claim may be denied.

Examples of life insurance frauds include:

  • Providing false information on the application: This can include misrepresenting your health status, lifestyle, or occupation. 
  • Concealing pre-existing conditions: If you have a pre-existing medical condition and do not disclose it on the application, the insurer may consider the policy void and deny the claim.
  • Making false claims about the cause of death: If the beneficiary provides false or misleading information about the cause of death, the insurer may investigate and potentially deny the claim.
  • Staging accidents or faking deaths: Some people may try to fake their own death or stage an accident in order to collect on a life insurance policy. This is a serious crime and can result in criminal charges in addition to the denial of the claim.

If your life insurance claim is denied due to suspected fraud, it’s important to cooperate with the insurer’s investigation and to consider seeking legal or financial advice to help you understand your options. It’s also important to remember that life insurance is intended to provide financial protection for your loved ones and should not be used as a means of committing fraud. 

What To Do if a Life Insurance Claim Is Denied?

You can ask your insurance company questions about your claim and their appeals procedure. Typically, you must provide evidence to support your appeal, including an autopsy report, medical records, and confirmation of premium payments. What papers you require can be determined by the insurance company. If your communications with the life insurance company are unsuccessful, we highly recommend talking to a lawyer to look into your appeal options.

Seeking Help from OmbudService for Life and Health Insurance

Understanding OLHI’s Role: After exhausting the appeals process with your insurer, it’s important to know that there are still options available for you. The OmbudService for Life and Health Insurance (OLHI) is an independent service that offers free, impartial dispute resolution. They specialize in addressing unresolved issues between customers and their life insurance providers.

Filing a Complaint with OLHI: To engage OLHI’s services, you must have completed the appeals process with your insurance company and received a Final Position Letter from them. This letter is a prerequisite as it indicates that you have gone through all the steps available within the insurance company. Once you have this letter, you can file a complaint with OLHI. The process typically involves submitting details about your policy, the claim, the denial, and any correspondence with the insurer.

How OLHI Can Help: OLHI reviews your case independently and can provide a different perspective on the dispute. They will examine the facts of the case, the policy terms, and the insurer’s reasons for denying the claim. If they find that the insurance company’s decision was unfair or not in line with the policy terms, they can recommend a resolution. While OLHI’s recommendations aren’t legally binding, they carry significant weight, and many insurers adhere to their findings.

Why Consider OLHI: Turning to OLHI can be a crucial step for those who feel their claim was unjustly denied. Not only does this service offer a second chance for your case to be heard, but it also reinforces the principle of fair treatment in the insurance industry. Moreover, OLHI’s services are free, making it an accessible option for all policyholders.

Remember, it’s important to keep all documentation organized and accessible throughout your dealings with both the insurance company and OLHI. This ensures a smoother process and a clearer presentation of your case.

Conclusion: 5 Common Reason Life insurance Claims Are Denied in Canada 

There are several reason that can lead to a life insurance claim being denied in Canada such as: 

  • Misrepresentation or omission of information
  • Policy lapses or non-payment of premiums
  • Exclusions in the policy
  • Misunderstanding of the policy terms
  • Fraud

If you are worried about your life insurance claim being denied, if you are thinking of purchasing life insurance or are looking to renew or change your life insurance, then talk to our team of life insurance brokers so that you and your loved ones understand your life insurance policies and can avoid the headache of being denied your life insurance claim. 

Frequently Asked Questions (FAQs) about life insurance claims being denied

 

There are a number of reasons why a life insurance claim may be denied, including:

  • The policy holder failed to disclose pre-existing medical conditions or dangerous hobbies or activities at the time the policy was purchased.
  • The death was the result of suicide or criminal activity.
  • The policy holder did not pay the premiums on the policy.
  • The death occurred outside of the policy’s coverage period.
  • The death was caused by a pre-existing condition that was excluded from the policy.
  • The policy holder lied on their application and provided false information.
  • The insurer find out the death was not accidental but rather due to natural causes

If your life insurance claim is denied, you can do the following:

  • Review the policy and any documentation provided by the insurance company to understand the reasons for the denial.
  • If you believe the denial was made in error, you may appeal the decision.
  • Request additional evidence or documentation that may support your claim.
  • Consider seeking the help of an attorney who specializes in insurance claims if you believe your claim was denied unfairly.

Yes, you can reapply for life insurance after a claim has been denied. However, it’s important to be upfront about the denied claim when applying for a new policy. Keep in mind that a denied claim may be viewed as a pre-existing condition that could make it more difficult to secure coverage, and the premium may be higher or the terms may be less favorable than it was before.

The length of time you have to file a life insurance claim will vary depending on the policy and the insurance company. It’s generally a good idea to file a claim as soon as possible after the death of the policy holder in order to avoid any potential delays. It is advisable to check with the insurance company for the specific time frame.

If the insurance company disputes your claim, they will likely require additional documentation or evidence to support your claim. You may need to provide additional information about the death, such as a death certificate, police reports, or medical records. If the dispute cannot be resolved, the insurance company may conduct an investigation, or if necessary, consult with legal counsel for further review.

Assigning the right beneficiary

Finding the right beneficiary will give you the peace of mind that you need. Assigning your life insurance beneficiary must be done right so that your wishes are met when your life insurance policy is paid out in the event of your death.

To schedule a consultation about your income protection goals, or if you have any questions about insurance in Ontario or Canada, please contact Protect Your Wealth or call us at 1-877-654-6119 to talk to an advisor today! We’re proudly based out of Hamilton, and service clients anywhere in Ontario, British Columbia and Alberta  including areas such as Ottawa, Guelph, Grande Prairie, and Kamloops. 

Talk to an advisor today.

GET A QUOTE
Contact Us
Best Life Insurance Quotes Canada Life Insurance