Life insurance is a contract between an individual (the policyholder) and life insurance companies in Sri Lanka, where the insurer agrees to pay a designated beneficiary a sum of money upon the death of the insured person. The insured person typically pays regular premiums to maintain the policy, and in return, the insurer provides financial protection to the beneficiaries in the event of the insured's death.
Life insurance in Sri Lanka serves various purposes, such as providing financial security for dependents, covering funeral expenses, paying off debts, and replacing lost income for surviving family members.
A life insurance claim occurs when the insured person passes away, and the beneficiaries or the policyholder's estate files a request with the insurance company to receive the death benefit specified in the policy. To make a claim, the beneficiaries typically need to provide the insurance company with a copy of the death certificate and any other required documentation. Once the claim is validated by the insurer, the death benefit is paid out to the designated beneficiaries or the policyholder's estate.
Common reasons why insurers deny life insurance claims
Life insurance claims can be denied by even the best life insurance company in Sri Lanka for various reasons, including:
- Material misrepresentation: If the insured provided inaccurate or false information on the insurance application, particularly regarding medical history, lifestyle habits, or other relevant details, the insurer may deny the claim.
- Policy lapse: If the insured failed to pay the premiums and the policy lapsed before their death, the insurer may deny the claim. It is crucial for policyholders to keep up with premium payments to ensure coverage remains active.
- Cause of death exclusions: Some life insurance policies have exclusions for certain causes of death, such as suicide within a specific period after the policy inception or death resulting from engaging in hazardous activities not disclosed in the application.
- Death during contestability period: Insurers have a contestability period (typically one to two years) during which they can investigate and deny claims if they find material misrepresentations on the application. After this period, claims are usually paid even if there were inaccuracies in the application.
- Failure to disclose medical information: If the insured failed to disclose relevant medical information that could impact the underwriting decision, such as a pre-existing medical condition, the insurer may deny the claim.
- Policy exclusions: Some policies have specific exclusions for certain conditions or circumstances. If the cause of death falls within these exclusions, the claim may be denied.
- Policy incontestability: After the contestability period expires, insurers generally cannot deny claims based on misrepresentation or inaccuracies in the application, unless fraud can be proven. However, if fraud is discovered, the claim may be denied.
- Non-disclosure of risky activities: If the insured engaged in activities considered risky by the insurer (e.g., extreme sports) and did not disclose them on the application, the claim may be denied.
It is essential for policyholders to thoroughly understand their life insurance policies, provide accurate information during the application process, and keep their policies active by paying premiums on time to minimise the risk of claim denial.
What to do if a life insurance claim is denied
If a life insurance claim is denied, there are several steps you can take to contest the decision:
- Review the denial letter: Carefully review the denial letter from the insurance company to understand the reason(s) for the denial. This will help you determine the appropriate course of action.
- Gather evidence: Collect any relevant evidence that supports your claim. This could include medical records, statements from witnesses, correspondence with the insurer, and any other documentation related to the policy or the insured's death.
- Consult with an attorney: Consider consulting with a lawyer who specialises in insurance law. They can provide guidance on your rights and options for challenging the denial. An attorney can also help you navigate the appeals process and represent your interests if the matter escalates to litigation.
- File an appeal: Most insurance companies have an appeals process that allows policyholders to challenge claim denials. Follow the instructions provided by the insurer for filing an appeal, and make sure to submit any additional evidence or documentation that supports your case.
- Request a review: If the denial is upheld after the appeal, you may have the option to request a review by a third-party arbiter, such as an independent medical examiner or an arbitration panel, depending on the terms of the policy.
- File a complaint: If you believe the denial was unjustified or unlawful, you can file a complaint with the appropriate regulatory agency in your jurisdiction. They may investigate the matter and take action against the insurer if necessary.
- Consider legal action: If all other avenues are exhausted and you still believe the denial was wrongful, you may choose to file a lawsuit against the insurer. Your attorney can advise you on the likelihood of success and represent you in court if you decide to pursue this course of action.
It is important to act promptly and diligently when contesting a denied life insurance claim, as there may be deadlines for filing appeals or complaints. Keep thorough records of all communication with the insurer and any steps taken to challenge the denial.
