8 Mistakes To Avoid When Filing A Life Insurance Claim

December 15, 2020 | J. Price McNamara
8 Mistakes To Avoid When Filing A Life Insurance Claim

Life insurance provides peace of mind that if you die unexpectedly, your family will have financial security. However, many things can happen from the time you purchase the policy to the time a life insurance claim is filed. One simple mistake can put your policy and payout at risk. Here are eight mistakes that you want to avoid when filing a life insurance claim.

1. You Failed to Update Your Policy Regularly Before Filing a Life Insurance Claim

One of the biggest mistakes people make is failing to update their life insurance policies regularly. It is crucial to review and change your policy as needed after major life events, like marriage, divorce, or the birth of a child. Failing to review and adjust your policy on a regular basis (every three years or so) may mean that your policy is payable to former spouses or others you may no longer want to receive the proceeds. It may also mean that your policy is no longer adequate to meet your family's needs.

2. You Don't Have Two Backup Beneficiaries

What happens if your beneficiary dies before you? If you failed to name two backup beneficiaries, the proceeds would go to your estate. If your estate becomes the beneficiary of your policy, it potentially subjects the proceeds to taxes and other complications. To avoid this, make sure that you have two backup beneficiaries for each beneficiary named in your policy.

3. Your Personal Coverage Won't Meet Your Family's Needs

One of the most challenging aspects of purchasing life insurance is determining how much personal coverage you will need. It's easy to underestimate how much money your family will need for financial security after your death. Several factors need to be considered, including (but not limited to):
  • Federal estate tax
  • State death tax
  • College tuition for minor children or grandchildren
  • Everyday living expenses (food, shelter, clothing, utilities, etc.)
Will the proceeds be able to cover these expenses after taxes? Performing a thorough insurance analysis can help ensure that your coverage will meet your family's needs.

4. The Information on Your Application Was Inaccurate

Withholding or providing inaccurate information on your application can result in a life insurance claim being denied due to material misrepresentation. If the insurer discovers that information was withheld or fraudulent while you are still alive, the policy may be terminated. It is crucial to be honest and transparent about lifestyle factors (like smoking) and medical conditions when applying for a life insurance policy. Otherwise, you put your policy and your family's future financial security at risk.

5. You Chose the Wrong Type of Insurance

Having the wrong type of life insurance policy may mean that your coverage runs out when you need it most. If you purchase a 20-year term life insurance policy at the age of 40, the policy will run out at age 60 when you may need it. To avoid this problem, work with an insurance professional to ensure that you have the right type of insurance for your needs. Many new types of policies are available that may be a better fit for your needs and life circumstances.

6. You Allowed Your Policy to Lapse

Missing payments or allowing your policy to lapse will leave you without coverage. Most insurers provide a 30-day or even 60-day grace period. During the grace period, your policy will still be active. In most cases, you can have your policy reinstated after the grace period. However, if too much time has passed, a new medical examination may be required. If, for some reason, you stop making payments on your policy and don't realize it, you won't have the coverage you need when you need it most.

7. You Named Your Estate as the Beneficiary

Naming your estate as a beneficiary in your life insurance policy can present a number of problems. One of the biggest concerns is that the proceeds of the insurance policy would be subject to higher or unnecessary state and/or federal death taxes compared to a named beneficiary. Additionally, naming your estate as the beneficiary also gives creditors access to the insurance proceeds. On the other hand, most state laws provide exemptions for life insurance proceeds paid to named beneficiaries.

8. You Named a Minor Child or Grandchild as a Beneficiary

Naming a minor child or grandchild as a beneficiary can create complications. Insurance companies will not knowingly provide large payouts to minor children. A guardian will need to be appointed by the court to dole out the money, and the cost of this complication will come out of the policy proceeds. If you wish to have a minor child or grandchild as a beneficiary, other routes, aside from direct payment, can be taken to help reduce the cost and provide flexibility. An experienced lawyer can help with this process. Do you need help with a life insurance claim? Have you been denied life insurance benefits? Reach out today for a Free Denial Review with an experienced ERISA attorney.  
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J. Price McNamara


Losing my own brother, then my father and sister after long, disabling illnesses just a few months apart drove a career change for me. Before that experience, I never truly understood the place you’re in. I never understood the dramatic impact that receiving (or not receiving) the disability and life insurance benefits you paid for and counted on can have on your life especially when you need to focus on family and healing. What I experienced with my own family now drives the way I view my clients and my work, and I will never forget it!

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