When and Why Are Death Benefits Denied?

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9 Minute read

Originally published: August 14, 2023

glioblastoma Life Insurance in Canada

Talk to one of our experienced advisors today!

9 Minute read
Originally published: August 14, 2023

glioblastoma Life Insurance in Canada

In the intricate world of life insurance, the guiding principle remains steadfast, honesty is paramount. While Canadians frequently purchase life insurance to ensure their loved ones are financially secure after their demise, there exist certain circumstances where this expected death benefit might not be granted. How does one navigate these complexities? Let’s delve into it.

Why Was My Life Insurance Contract Rescinded?

Life insurance contracts are legal agreements between an individual (the policyholder) and an insurance company. Both parties have obligations and responsibilities that are outlined in the policy. However, there are certain situations in which an insurance company may rescind or cancel a contract. Here’s a closer look at the reasons why this might happen:

  1. Misrepresentation or Non-Disclosure: This is one of the most common reasons for a policy to be rescinded. If an applicant provides false information or fails to disclose important details about their health, lifestyle, or other factors that affect the underwriting decision, the insurer may cancel the policy. For instance, an applicant might fail to mention a pre-existing condition like early-stage dementia, or might incorrectly state that they don’t smoke.
  2. Contestability Period: Most life insurance policies have a contestability clause, which typically lasts for two years from the policy’s start date. If the policyholder passes away within this period, and it’s discovered that they provided false or incomplete information during the application process, the insurer can contest and potentially deny the death benefit. After this two-year window, the insurer usually can only rescind the policy for fraudulent misrepresentation.
  3. Fraudulent Misrepresentation: If an insurance company discovers that a policyholder intentionally provided false information with the aim of deceiving the insurer, they can rescind the policy. This goes beyond simple errors or oversights and typically involves clear intent to defraud.
  4. Failure to Pay Premiums: While this doesn’t exactly result in the contract being “rescinded,” failure to pay premiums can lead to a policy being lapsed or cancelled. Some policies might offer a grace period, but if premiums remain unpaid after this period, the policy can be terminated.
  5. Specific Exclusions: Some policies might have specific exclusions that, if triggered, can result in the policy not paying out or being cancelled. For example, some policies won’t pay out if the policyholder commits suicide within the first two years of the policy.
  6. Risky Hobbies or Occupations: If an individual engages in high-risk activities such as skydiving, scuba diving, or piloting an aircraft, and fails to disclose these to the insurer, it could be grounds for rescission if discovered.

To avoid finding yourself in a situation where your life insurance policy is rescinded, it’s crucial to provide accurate and complete information during the application process. Working closely with an insurance advisor can also help ensure that you fully understand the terms and conditions of your policy and meet all of your obligations as a policyholder.

What is the Contestability Clause in Life Insurance?

The contestability clause in life insurance is a provision that grants insurance companies the right to review and possibly contest claims made within a specified period after a policy is issued, typically two years. During this time, if the policyholder passes away and the insurance company discovers inaccuracies, omissions, or misrepresentations in the policy application, they can investigate and potentially deny the death benefit. This clause is designed to protect insurance companies from fraudulent claims or from policyholders who might have intentionally concealed significant information that would have influenced the underwriting decision.

However, once this contestability period expires, it becomes much more challenging for an insurer to deny a claim unless there’s evidence of outright fraud. It’s worth noting that even simple mistakes or unintentional oversights during the application process can be grounds for contesting a claim within this period. Applicants are advised to provide accurate and comprehensive information when applying for life insurance to ensure their beneficiaries receive the intended benefits.

Are there Specific Situations Where Insurance Companies Refuse Death Benefits?

Yes, there are specific situations in which insurance companies might refuse to pay out death benefits. One of the primary reasons is misrepresentation or non-disclosure on the policy application. If an insurance company determines that a policyholder provided false or incomplete information, especially regarding medical history or lifestyle habits, they might deny the claim, especially if this occurs within the contestability period, typically the first two years after the policy is issued. 

Another scenario is if the policyholder commits suicide within an initial period after obtaining the policy, commonly the first two years; many policies contain clauses that exclude payment in such cases. Other reasons for refusal can include the policyholder’s involvement in illegal activities leading to death, deaths occurring from specific excluded high-risk activities, or simply if the policyholder’s premiums were not up-to-date, leading to a lapse in the policy.

 It’s also essential to note that insurance companies might refuse to pay out if the death occurs due to circumstances covered under policy exclusions, such as certain types of hazardous hobbies or professions.

How are Life Insurance Premiums Affected by Smoking?

Life insurance premiums are significantly influenced by the health and lifestyle choices of the policyholder, with smoking being a primary determinant. Smokers are generally perceived as higher-risk clients by insurance companies because of the well-documented health complications associated with tobacco and nicotine consumption. 

As a result, life insurance policies can be 30-40% pricier for smokers compared to their non-smoking counterparts. It’s crucial for potential policyholders to understand that insurers don’t just consider traditional cigarette smoking. 

Using e-cigarettes or vaping with nicotine, resorting to nicotine patches for cessation, or even occasional or casual smoking, also classifies an individual as a smoker in the eyes of most insurers. This broader definition can substantially elevate premiums even if the individual considers themselves a non-traditional or infrequent tobacco user. It’s essential to be transparent and accurate about any nicotine use when applying for life insurance to ensure the policy’s validity and to anticipate the premium costs accurately.

What’s the Role of the Advisor in the Application Process?

The role of an advisor in the life insurance application process is multifaceted and pivotal for ensuring that clients receive policies that best align with their needs and circumstances. At the outset, advisors educate clients about the various types of life insurance products available, explaining the benefits, coverage, and costs of each, enabling clients to make informed decisions. They also conduct a comprehensive needs assessment, factoring in the client’s financial situation, goals, dependents, liabilities, and more, to recommend the most suitable coverage amount and policy type.

A significant part of an advisor’s role is to guide clients through the application process itself. This involves ensuring that the client provides accurate and complete information, especially concerning health, lifestyle, and other risk factors. Given the implications of misrepresentation, advisors emphasize the importance of honesty, helping clients understand the potential consequences of inaccurate disclosures.

Moreover, advisors often serve as intermediaries between the client and the insurance company, navigating any queries or concerns that arise during underwriting. They can advocate on behalf of clients, particularly when there are medical or other concerns that might complicate the approval process.

Advisors also clarify policy terms, conditions, and exclusions, ensuring that clients fully understand their policy’s nuances. Their role doesn’t necessarily end once the policy is issued; advisors often maintain an ongoing relationship with clients, reviewing policies periodically to ensure they remain aligned with changing life circumstances and advising on potential adjustments.

Ultimately, the advisor’s role in the application process is to ensure the client receives the best possible coverage at a fair premium, while also fostering understanding and trust. They prioritize the client’s long-term security and well-being over immediate gains, emphasizing the importance of due diligence and integrity throughout the application process.


Understanding life insurance intricacies is more than just reading through policy documents; it’s about securing peace of mind for the future. As we’ve delved deep into the realm of death benefits and the reasons they might be denied, it’s evident that clarity, honesty, and vigilance play pivotal roles. Equipped with this knowledge, policyholders can ensure that their intentions for financial security are not only realized but also unshaken in the face of challenges. As we wrap up this discussion, let it serve as a reminder that, in the vast landscape of life insurance, being informed is the cornerstone of ensuring that our loved ones are never left in the dark.

Frequently Asked Questions (FAQs) about Why Death Benefits Was Denied

Yes, insurance companies often set a specific time frame within which beneficiaries must file a claim after the death of the policyholder. Failure to file within this period might result in denial. It’s crucial to check the policy details or consult with an advisor to understand any such time constraints.

If the policyholder’s death is a direct result of involvement in illegal activities, the insurance company might refuse to pay out the death benefit. Each policy might specify different conditions regarding this, so it’s essential to be familiar with your policy’s exclusions.

Some insurance policies may have exclusions for deaths occurring in regions that are considered high-risk, either due to political unrest, wars, or specific health epidemics. If a policyholder travels to and dies in one of these regions, the death benefit might be denied.

It can. Some policies might be specific to accidental deaths, while others might cover any form of death. However, the circumstances surrounding the accidental death, such as involvement in risky activities or illegal behavior, can influence the decision.

If the policyholder engaged in a high-risk activity, like skydiving or mountain climbing, and didn’t disclose this during the application, the insurance company might deny the claim, especially if the death was a direct result of that activity.

Insurance companies may conduct investigations, especially if the claim arises during the contestability period. They can review medical records, consult with the deceased’s physicians, or even interview acquaintances to verify the accuracy of the information provided in the application.

Find a solution for what you’re looking for 

In the world of life insurance policies and provisions, understanding the reasons behind denied death benefits is essential, ensuring that beneficiaries are adequately protected and prepared during life’s most challenging moments. At Protect Your Wealth, we work with and compare policies and quotes from the best life insurance companies in Canada to ensure the best solution for you and your needs. We provide expert life insurance solutions, including no medical life insurance, critical illness insurance, term life insurance, and permanent life insurance to build the best package to give you the protection you need. 

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 Burlington, Grande Prairie, and Vancouver

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