What to Do When a Life Insurance Claim Is Denied

The Most Common Reasons Claims Are Denied

Most life insurance claims are paid without any problem. Denials are the exception, not the rule. When a claim is denied, the reason usually falls into one of a few clear buckets.

Final expense insurance is a small whole life policy, also called burial insurance or funeral insurance. The same claim rules that apply to other life insurance apply to it too.

Here are the reasons insurers most often give for a denial:

The three reasons below come up most often, so they are worth understanding closely.

Denials During the Contestability Period

Most life insurance policies have a two-year “contestability period” that starts on the policy’s effective date. If the insured dies during these first two years, the insurer has the right to review the application before paying.

During this review, the insurer checks whether the application was accurate. They may look at medical records, lifestyle details, and other documents to confirm what was disclosed.

If they find a “material misrepresentation” — a wrong or missing detail that would have changed the price or the decision to insure — they can deny the claim or reduce the payout. Not every mistake counts. Minor errors or forgotten routine doctor visits usually do not justify a denial.

One important point in your favor: the insurer must prove the misstatement was material, meaning it would have changed the underwriting decision. The burden is on them, not on the family.

After two years, the policy generally becomes incontestable, and claims are rarely challenged. Proven fraud is a narrow exception to this.

Here is something that surprises many families: reinstating a lapsed policy restarts the two-year contestability period. A newly reinstated burial insurance policy may have a fresh review window.

Denials Because the Policy Lapsed

A policy “lapses” when premiums go unpaid and coverage ends. This is one of the most common reasons final expense and other life insurance claims are denied.

A missed payment does not end coverage right away. Policies include a grace period — often around 30 days — during which coverage stays active and a late payment keeps it in force. Some states require a longer grace period. California, for example, requires at least 60 days.

If the insured dies during the grace period, benefits may still be payable, though any unpaid premium may be subtracted. If the grace period ends with no payment, the policy lapses and a later death is usually not covered.

But a lapse is not always valid. Before ending a policy, insurers must follow strict rules, including advance written notice and a mandatory grace period. If they fail to follow these rules exactly, the lapse may be invalid and coverage may still apply.

Situations where a lapse denial may be worth a second look:

• Required lapse or grace-period notices were never sent
• Notices were mailed to an old or incorrect address
• A bank draft or automatic payment failed through no fault of the insured
• A payment was misapplied or credited to the wrong policy
• The insured died during the grace period
• The policy had cash value the insurer could have used to cover the missed premium

Denials for Excluded Causes of Death

Life insurance covers almost every cause of death. But every policy lists a few exclusions — specific causes it will not pay for — and these are spelled out in the policy documents.

The most common exclusion is suicide in the early years. If death is by suicide within the first two policy years (one year in some states), it is typically not covered, and after that period it usually is. When the suicide exclusion applies, premiums paid are usually refunded to the beneficiaries.

Other exclusions can appear depending on the policy:

There is good news for most final expense buyers. Deaths from natural causes like heart disease, cancer, or stroke are generally not excluded, as long as the policy was active and the application was accurate. These are exactly the end-of-life situations burial insurance is designed to cover.

One thing to check in the policy: many guaranteed-issue and simplified-issue final expense policies include a “graded” benefit for the first two or three years. During that early window, a natural-cause death may pay back premiums plus interest instead of the full amount. This is written into the policy terms rather than a denial, but it can surprise families, so it is worth reading before you buy.

How to Appeal a Denied Claim, Step by Step

A denied claim is not always the final word. Insurers must follow strict procedures, and in many cases denials can be appealed and overturned. Working through the appeal in order gives you the best chance.

One point before you start: the type of policy changes the process. Individual funeral insurance and life insurance policies are governed by state law. Employer group life insurance is usually governed by a federal law called ERISA, which often allows only one appeal. That makes the ERISA deadlines especially important to catch early.

Step 1: Read the Denial Letter and Identify the Stated Reason

The insurer must send a written denial letter explaining why the claim was refused. If you were denied over the phone, you have the right to demand the denial in writing.

Read the letter closely and find the exact reason. It should point to a specific policy provision, such as a lapse, an exclusion, or a misstatement on the application.

If the letter only uses vague phrases like “policy provisions” or “investigation ongoing,” contact the insurer and request clarification right away. You cannot build a strong appeal against a reason you do not understand.

Also look for two things: the appeal instructions and the deadline. Deadlines are firm. For ERISA group policies, the appeal must often be filed within 60 or 180 days, and missing it can permanently end your right to benefits.

Step 2: Request the Claim File and Policy Documents

You cannot fully evaluate a denial without reviewing the full policy and the insurer’s internal claim file. Ask the insurer for both.

The claim file shows how the insurer reached its decision. Insurers sometimes deny claims based on incomplete or inaccurate internal reviews, and the file can reveal that.

For lapse denials, also request the full premium payment history and copies of every lapse and grace-period notice. Many lapse denials are overturned once the insurer is required to prove it followed the notice and payment rules.

Gather your own records too. Useful documents include the original policy and any riders, the application, proof of premium payments, and any correspondence with the insurer.

Step 3: Gather Evidence That Rebuts the Denial

Your goal is to answer the exact reason the insurer gave. The evidence you gather should directly address the insurer’s stated reason for denial.

Here is how the evidence usually lines up with the denial:

For a lapse denial, proof of timely payments or evidence the insurer failed to send required notices is key. For an exclusion, show why the exclusion does not apply and provide supporting documents.

Collect records that are clear and easy to follow. Medical records, a doctor’s statement, canceled checks, and written statements from the insurer can all strengthen your case.

Step 4: Submit a Written Appeal to the Insurer

An appeal is not just a letter asking the insurer to reconsider. It is a formal submission that should show why the insurer misapplied the policy or the law.

Follow the insurer’s stated appeal process and meet the deadline. Send the appeal to the insurer’s claims department and keep copies of everything.

A strong appeal letter usually includes the policy number, the insured’s name, and the date of death, along with a clear statement that you are appealing and a summary of why the denial was wrong.

Point to the specific policy language that supports payment, and attach all supporting documents. Stay clear, factual, and respectful, but firm. Evidence changes decisions; emotional arguments alone usually do not.

After submitting, confirm the insurer received your appeal and ask for a review timeline. Keep gathering any additional evidence while they review.

For ERISA group policies, take extra care. Whatever you submit usually becomes the permanent record, and you often cannot add new evidence later in court. If the appeal is complex or a large benefit is at stake, this is often where families choose professional help, which the next sections cover.

When to File a Complaint With Your State Insurance Department

Every state has a Department of Insurance (sometimes called the DOI) that regulates insurers and protects consumers. Filing a complaint is free, and it can be a helpful step when an insurer is not treating you fairly on a final expense or other life insurance claim.

The best time to file is after you have tried to resolve the problem with the insurer directly. If you have a problem with your insurer, you should try to resolve it with them first, and if you are still not satisfied, you can contact your state department for help.

Delays, denials, and unfair settlements are among the most common reasons people file. Your state department can investigate issues like:

• Unfair claim delays or denials
• Failure to honor the policy
• Violations of state insurance laws
• Poor or missing communication from the insurer

It helps to know what a state department can and cannot do:

To start, the National Association of Insurance Commissioners (NAIC) keeps a consumer page at content.naic.org/consumer where you can find your state department and its complaint form. The process varies by state, but most departments allow you to file online, by mail, or by phone.

When you file, keep it concise and factual. Include the policy number, claim reference, timeline, copies of the denial letter, and your supporting documents.

The department will typically forward your complaint to the insurer and require a response, then review whether that response follows state law. Based on 2024 complaint data, common outcomes included the insurance company’s position being overturned or a settlement being negotiated.

One note: if your policy came through an employer group plan governed by ERISA, the state department may have limited jurisdiction over it.

When to Hire an Attorney

Most claims are paid without any need for a lawyer. But some denials are complicated enough, or involve enough money, that professional help is worth considering.

Here are signs it may be time to talk to a life insurance attorney about a final expense insurance or other claim:

• Your appeal was denied and you still believe the denial was wrong
• The insurer seems to be delaying or denying without a valid reason
• The denial came during the contestability period and alleges misrepresentation
• Your coverage is an employer group plan governed by ERISA
• More than one person is claiming the same benefit
• A large benefit is at stake and the insurer is stalling well past a reasonable time

A few of these deserve a closer look.

Bad faith. Insurers have a legal duty to handle claims fairly. If an insurer breaches its duty of good faith, a beneficiary may recover damages considerably greater than the value of the policy itself, including punitive damages and attorney fees. An attorney experienced in these cases can spot when that applies.

Beneficiary disputes and interpleader. An interpleader happens when more than one person claims to be the rightful beneficiary; the insurer may file a lawsuit, deposit the money with the court, and let a judge decide who receives the payout. A lawyer can represent your interest in that process.

ERISA group policies. Employer group life insurance follows strict federal rules. You generally cannot sue for bad faith or punitive damages in an ERISA case, and appeals may need to be handled carefully before filing a federal lawsuit. Because mistakes can be hard to undo, early legal guidance matters here.

How lawyers usually charge. Many life insurance attorneys work on a contingency fee, meaning they are paid only if they recover money for you, and a standard contingency is around one-third of the policy’s death benefit. Initial consultations are often free, and the contingency usually covers court costs and litigation expenses as well as the attorney’s fee.

Before hiring anyone, it is reasonable to first use the free options — appealing directly and filing a state complaint. It’s worth exhausting the do-it-yourself options to fight a denial before risking a share of the benefit to attorney fees. If those do not work and the case is strong, a free consultation can help you weigh whether legal action makes sense.

This section is general information, not legal advice. A licensed attorney can review the specifics of your situation.

How Policyholders Can Prevent Denials Before They Happen

The good news is that denials are uncommon. At the end of 2021, only about 0.02% of life insurance payouts were reportedly delayed or denied. Most that do happen trace back to a few avoidable issues, so a little care when you buy and maintain a burial insurance policy goes a long way.

Here are the main risks and the simple steps that prevent them:

A few of these are worth emphasizing.

Honesty on the application is the single best protection. Most application-based denials happen during the two-year contestability period, and they usually involve details left out or stated incorrectly. Answering all application questions honestly — including health, smoking, income, and hobbies — is the best way to protect a future payout.

Avoiding a lapse is the other big one. Policy lapse from missed premiums is one of the most frequent reasons claims are denied, and it is also the easiest to prevent. Setting up automatic bank drafts and naming a trusted person to monitor payments if you become incapacitated keeps coverage from ending by accident.

Keep beneficiaries current. Keep beneficiary forms updated after major life changes, and don’t rely on a will to override an insurance policy — it usually can’t. Naming a backup beneficiary avoids delays if your first choice passes before you.

For most people, final expense insurance does exactly what it promises. When the application is accurate and the policy stays active, a natural-cause death is paid to loved ones without trouble.