Can the insurance company deny a life insurance claim if the insured dies before they receive the application and premium?

Answer 1

Yes, the insurance company can deny a life insurance claim in the event of death before the company receives the application and premium. The question uses the word "insured" but at this stage in the process, the correct description would be "applicant" or "proposed insured".

Life insurance protection can be in-force before a policy is approved and issued by the company under certain circumstances. The usual rule is that coverage is effective upon the completion of three items: the application, the exam if required or the health questionnaire if exam is not required, and a check for at least the first month's premium.

The application contains either a conditional receipt for temporary insurance (CR) or a temporary insurance agreement (TIA). Each life insurance company utilizes one or the other; more companies use the temporary life insurance agreement). There are specific terms in the TIA that must be complied with in order for the temporary insurance to be effective.

It is possible for a claim to be paid by the insurance company if the applicant dies in the very short time frame between when he or she completed the application, provided the required health information, wrote a check for the first month's premium and satisfied the terms of the temporary insurance agreement but before the insurance company received these items.

In this situation, the insurance company would review the claim and if all of the above items are satisfactory would pay the claim. Claims have been paid under these facts but note that the time frame between the applicant completing all the requirements and the insurance company receiving them would be very short, typically no more than a week or so.

Unless all of these documents, along with the check, are in order the insurance company would not be liable for the claim.