A life insurance policy is supposed to provide financial protection when a loved one dies. But what happens when the insurance company delays, denies, or disputes the claim?
In this episode of The Agent of Wealth, co-host John Williams is joined by Stephanie Prestridge, an attorney at Life Claim who focuses on helping families navigate life insurance claims that have been denied, delayed, or disputed after the death of a loved one.
In this episode, you will learn:
- How the life insurance claims process typically works after someone passes away.
- How the two-year contestability period can affect a claim and potentially lead to delays or denials.
- Common mistakes people make when completing a life insurance application and how misunderstandings or inaccurate information can create problems later.
- Why it’s important to review beneficiary designations regularly and make sure your family knows about your life insurance policies.
- How beneficiary disputes can arise and what can happen when someone challenges a designated beneficiary.
- What to do if a life insurance claim is denied or delayed, including when it may be time to seek legal counsel.
- And more!
Tune in for an important conversation about the potential challenges surrounding life insurance claims — and practical steps you can take now to help protect your family and the benefits you intended them to receive.
Resources:
lifeclaim.com: (888) 615-3270 | Follow Stephanie Prestridge on LinkedIn | Follow @lifeclaimwins on Facebook & Instagram | Bautis Financial: 8 Hillside Ave, Suite LL1 Montclair, New Jersey 07042 (862) 205-5000 | Schedule an Introductory Call
Disclosure: The transcript below has been edited for clarity and content. It is not a direct transcription of the full episode, which can be listened to above.
Welcome back to The Agent of Wealth Podcast, this is your co-host John Williams. Today, I am joined by a special guest, Stephanie Prestridge.
Stephanie is an attorney with nearly 20 years of experience in estate law. Today, she and her law partner focus on helping families navigate life insurance claims that have been denied, delayed, or disputed after the death of a loved one. Her work centers on helping beneficiaries understand their options and fight for the benefits their loved ones intended to provide.
Stephanie, welcome to the show.
Hi. Thank you so much for having me. It’s a pleasure to be here.
It’s great to have you. I’m really looking forward to this conversation. To me, this is one of the ultimate “insult to injury” scenarios. If you’re filing a life insurance claim, you’re obviously already dealing with a difficult situation. Then you receive a denial, and I can only imagine how devastating that can be.
We work with a lot of people who put life insurance in place, and sometimes we take for granted that the benefit is going to be there when it’s needed. You spent nearly 20 years practicing estate law. Maybe you could share a little bit about what led you toward this area of practice.
Absolutely. It’s hard to hear “almost 20 years” of practice, right?
I was an estate planner for over 20 years, and I loved my practice. I had a really unique perspective when taking on estate planning clients: I would not take on a client unless they had a financial advisor.
To me, it didn’t make sense to plan for where your assets would go when you passed away if you didn’t have sufficient assets to live on beforehand. There was a beautiful harmony between working with financial advisors and making sure that everything was in place.
And that’s really where the “insult to injury” happens. Clients were doing what we were encouraging them to do. They were getting their financial plan in order. They were working with their financial advisor to make sure they had their investments, life insurance, and all of these other pieces in place.
I was working with them to make sure they had their estate planning documents—their wills, trusts, and everything else—and that all of these pieces worked together and accounted for one another.
Then we started having clients come in who had done everything right, and we were seeing problems. Not only were we seeing problems, but we were seeing problems with what I thought was supposed to be the easy part: life insurance.
Life insurance was supposed to be the easy part. We would look at it and say, “This is how it’s going to pay out. This is how we’re going to use it. This is how it fits into your estate plan.”
Then clients who had done everything right would suddenly come in and say, “Wait, they’re not paying it.” Or, “They’ve flat-out denied it.”
That bothered me so much that it changed the entire focus of my practice. If it was happening to my clients who were working with all of the right professionals, then it was happening everywhere.
You make a really good point. Obviously, as professionals, people put their faith in us. To me, that would be pretty frustrating—and even make me angry—if something like that happened.
It sounds like you had some personal experience with clients going through this.
Yes. It was more than just frustrating. It was almost shattering for me as an attorney, and I hadn’t even lost anyone myself.
I had clients coming in who were grieving. They were dealing with an issue at the worst time of their lives, and they didn’t know what to do. I was looking at it thinking, “But this is the easy part. It’s supposed to pay out.”
This was the part where we knew the family was going to be okay for a little while so they could grieve and take the next steps. So what do you mean there’s a delay? It’s being denied? It’s being disputed?
I don’t think people realize, at least not very well, that anyone can challenge the beneficiary of a life insurance policy. So there can be delays in payment, denials by the insurance company, and even disputes over who the named beneficiary is.
It’s overwhelming. I want to assume that a lot of our listeners have never had to—and luckily, never had to—file a life insurance claim. Maybe it would be helpful to lay some groundwork. What does the claim process actually look like? How does it work after somebody passes away?
Absolutely. When someone passes away, you initiate the claims process. It depends on whether it’s a personal policy or a policy through work.
For a personal policy, you can call the insurance company and say, “My loved one has passed away. I need to start the process of filing a claim.” Most of the time, you can also go online and find the form you need to complete.
If it’s a work-related policy, you would contact the company’s HR department. They can complete a portion of the claim form to confirm that your loved one worked there, that they had the benefit, and that they qualified for it.
So, you start the paperwork process.
What often happens when you start that process is that someone from the insurance company will call you and say, “My goodness, I’m so sorry that your loved one has passed away. What happened? We’re working on this claim for you. Tell us what happened.”
It sounds like a very kind conversation. Someone is reaching out and saying, “We understand what you’re going through. We’re working on this paperwork for you. Tell us what happened.”
So many people respond to that by opening up. They talk about the illness, stressors, or other things that were happening in their loved one’s life.
What they don’t realize is that the person on the other end of that call is taking notes, and those notes can potentially be used as a foothold to delay or deny the claim.
In a straightforward case, the claim should generally be paid within 30, 60, or 90 days, depending on the circumstances.
What you’ll see, though, are more and more delays. The insurance company may start asking for additional information or put the onus on you to obtain medical records or get additional documents signed for them to review.
Other times, they’ll come back and say, “Someone has called in and is disputing who the beneficiary is. We need the two of you to figure it out and work on this.”
There are so many things happening behind the scenes that people don’t understand, and those things can affect their rights to the policy benefits.
There are these delay tactics, and you mentioned some of the things that can happen, like requesting additional information. What are some of the most common reasons a life insurance claim is ultimately denied?
I think a very common one is the two-year contestability period.
People often don’t understand that when you get a policy, the first two years generally include a contestability period. If someone passes away during those first two years, the insurance company has the right to reassess the contract that was signed and the health conditions of the insured.
They can request medical records going back a very long time and ask, “Did we actually understand all of the health conditions? Were you telling the truth when this policy was obtained?”
That can create a huge delay because they’re requesting records and going through them with a fine-tooth comb to see if there’s anything they can use as a basis to deny the policy.
And I want to be clear: during that two-year contestability period, how the person died does not necessarily have to be related to the health factors the insurance company is investigating.
We’ve seen cases where someone was murdered during the two-year contestability period. I have one case with a particular insurance company that has been going on for 257 days while they review medical records.
We can acknowledge that how he died had nothing to do with his prior health history, but that’s how the two-year contestability period works, and it can create a significant delay in paying out those proceeds.
That’s one very common issue.
Another is an accidental death policy. If someone has passed away and the claim is being made that it was an accident, the insurance company may look at police reports, toxicology reports, witness statements, and other evidence.
Anything that can delay the process may be utilized. And during that delay, they’re building a case file to determine whether there’s a basis on which to deny the claim.
So, I got my start in the insurance business, and the contestability period was always something I felt a responsibility around. When we were putting an application together and answering all those questions, you’d always get that feeling of, “What do they mean by this?” or “What are they trying to do here?”
The idea that the insurance company could come back and scrutinize those things made it really important to me that the application was accurate and that the underwriting process was clear.
I was lucky enough to work with someone who had a loved one pass away during that contestability period. It did work out, but for the first time, I saw what felt almost like a legal tactic—this idea of delaying and delaying. That’s part of the game, right?
I understand. It’s part of what they want to do. I think delaying increases the chances that people will simply give up. They’re grieving, they’re overwhelmed, and they’re dealing with all of this at the worst possible time.
With that said, what are some of the mistakes people make during the underwriting or application process—or anywhere along the way—that could potentially set them up for a denial?
Absolutely. I want to go back to something you just said—not about lawyers, though. I do appreciate it.
I was kidding. I’m sure you were thinking, “Lawyers…” I have a bunch of friends who are lawyers.
I tell everyone that my mom was appalled when I became a lawyer. She was really upset with me.
But it absolutely is a game of attrition. I think everybody needs to write that down and put it in their pocket: It is a game of attrition.
They are waiting for you to give up. You’re grieving, you’re overwhelmed, and you’re trying to make it through each day. Then you have this delay, additional requests, and more paperwork. How many people give up because they simply can’t take one more thing?
I understand the idea of trying to make sure that bad actors don’t profit from their actions. But when this is done on a wide scale, it becomes a game of attrition, and they are making money when people give up.
The next thing I would point out, when we talk about that two-year contestability period, is that I’m like you—I see these applications all day.
I don’t write the policies, but I review them and talk to people about them. They’ll say things like, “We didn’t understand that question to mean this,” or, “It was true at the time we filled out the application, but between filling out the application and actually getting the policy, we did go see a doctor. But the question asked about the time we filled out the application.”
They’ll say, “None of this makes sense to us.”
Very few people actually lie on an application. In my experience, it’s much more often a mistake or a misunderstanding. But it’s fundamentally important to realize that most states do not distinguish between a mistake and a lie.
If something on the application isn’t true, the insurance company may have a basis to say, “We would not have issued this policy,” regardless of whether the inaccurate answer was due to a misunderstanding or an intentional attempt to deceive.
And that’s heartbreaking because, under those circumstances, everyone can end up dealing with the consequences.
When we look at common mistakes people make, I have two that are complete opposites, but I think it’s really important to start with them.
The first is not saying enough.
I see so many people who have life insurance policies in place but don’t tell anyone that they have them. They don’t tell their family what kind of policy it is, where the policy is located, or who the beneficiaries are.
Then, when that person passes away, family members are scrambling—or they do nothing.
I get calls all the time from people saying, “I just found this policy in Grandpa’s filing cabinet, and it’s been six years since he passed. Can we still make this claim?”
I don’t know. It depends on the policy. Let’s look at it together.
So the first thing I see is that people don’t say enough.
The second thing I see is that people say far too much.
When those calls come in and someone from the insurance company says, “My gosh, we’re so sorry for your loss. Tell me what happened. What’s going on?” your answer should be, “I don’t know. What do I need to complete? Do you have the form? Can it be emailed to me? Is it coming in the mail? Should I complete it online?”
That’s it. Don’t offer anything else, because they may use that information to create a file that can be used against you.
Honestly, as I sit here, I would have never even thought of that. It feels kind of dirty, but I guess it is part of the process.
I don’t know if the people making those calls are bad people. I don’t even go there. They’re not bad people. I have to believe that. They’re doing business, and that’s the way that business is being conducted.
We’ve actually seen claim forms that include paragraphs people don’t read in the fine print when they sign their names to make a claim. Those paragraphs can say that you’re giving the insurance company the right to go back and reopen medical records to determine whether everything was accurate.
They’re essentially expanding the scope of that two-year contestability period right there on the claim form.
So they’re making it much wider simply by having you sign the claim form to receive your benefits.
We’ve had those claim forms come to us, and we’ll scratch that language out and say, “You don’t need this. It doesn’t apply. You’re not allowed to have that.”
It’s very frustrating to see that happen.
Another mistake we see is families trying to handle the claim on their own.
I say this because there are so many rules and so many factors that have to be considered when making these claims. It’s not simply, “I think I’m right.”
You have to understand that this is contract law based on state law, and it may be handled in federal court depending on the circumstances. Just because you live in one state doesn’t mean that state’s law necessarily applies.
You have to understand which law applies and where the policy came from.
Because there are deadlines, and they can be very strict. Those deadlines can depend on where you received the policy. Did you get it from an individual agent? Did you get it through your employer?
How you respond, the type of evidence you submit, and when you submit it can all affect your rights. Those rights are governed by the type of policy and the applicable state and federal laws.
When people call me and say, “I tried to write my own appeal. I ran it through AI,” I have to explain that AI can be a wonderful tool for helping you understand your rights, but it isn’t necessarily the right tool for handling an appeal.
I have to tell them, “I don’t know if I can help you anymore, because your rights and the evidence available to you may have been affected by trying to handle it yourself.”
It’s frustrating for all of us to have to sit there and say, “I’m sorry. I’m going to explain this to you, but I also have to explain how I could have helped and why I may not be able to help anymore.”
Yeah, it’s a tricky spot to be in from a lot of different angles.
Even in our business, you get to the point where someone might say, “I’m 60 years old. I want to retire in three years.”
But at that point, I’m not a magician. If you haven’t saved enough up to that point, there are limitations to what we can do.
These conversations always remind me of the movie The Rainmaker. I’m sure you’ve heard of it, and maybe people have brought it up to you before. Obviously, it wasn’t about life insurance, but it involved an insurance company and the idea of having legal recourse against a big insurance company.
With that, I want to get into what happens when a family comes to you and says, “I’ve been denied. What do we do?” What does that process look like?
Absolutely. My job is to look at the situation and ask, “What happened?” I try to understand why we think it happened and what steps can be taken next.
If a family comes to me and says, “We received this letter. It says we’ve been denied,” I immediately ask for the letter.
I’ll read through it carefully. If they have the contract or life insurance policy, I’ll ask for that as well so I can review it.
Then I’ll ask a few questions and say, “Okay, based on what I’m seeing, these are the steps we can take. Is this something you would like to pursue?”
If it’s something where I feel I’m unable to provide assistance, I’m always honest. Our entire firm is honest about how we handle these cases. We’ll say, “This is what we see. This is why we can help, or why we cannot.”
If we can’t help, we always try to provide another resource. In several cases, I’ve said, “This is what I’m seeing, and this is why I’m not sure I’m the right person. But I want you to understand what I’m seeing.”
That way, if you call someone else, you have information to present to them and ask, “Do you see it this way? Do you see a different perspective?”
I want people to know: keep trying.
When we do see a way forward, we explain what that looks like, both in terms of time and process. Then we can say, “Let’s move forward and see if we can help you handle this case and get the benefits you’re entitled to receive.”
What does that typically look like—the next steps beyond that? So you decide, “Hey, I can actually help you.” Obviously, there are probably details that wouldn’t make sense to us because we’re not lawyers, but how does it usually play out from there?
If you came to me today and said, “I have this denial letter,” and I said, “I can help you,” the first thing I would do is explain our internal process.
If you said, “Yes, I want to move forward,” I would have you sign an engagement agreement so that I could become your counsel. I would then immediately send a notice of representation to the insurance company saying, “We are handling this. We are disputing this denial.”
Depending on where that denial or delay stems from, we’ll ask for a status update, request the relevant files, and immediately begin working on an appeal to submit to the insurance company.
The process can take anywhere from several months to several years, depending on the type of claim.
Usually, the claims I handle don’t stretch out for several years. But if we’re dealing with a disputed beneficiary, those cases can take longer. We work to handle them as quickly as possible to get those funds paid out.
The beneficiary issue really stands out to me because it seems like a pretty simple thing. Here’s the name—it’s in the beneficiary box. What are they trying to say? Is it the same name as another person? What is going on there?
All kinds of things. I’m so glad you followed up on that because we’re seeing this more and more.
Anyone can dispute a designated beneficiary. Anyone.
I’ve seen people call and say, “I don’t think that’s proper. I think the person was being unduly influenced when they changed the beneficiary.”
Or, “I don’t think the change was proper. It was done online, and I don’t really think it was them who submitted the change of beneficiary form.”
Or, “I spoke to them before they passed away. This is not what they wanted. I don’t care what the paperwork says. I can try to prove otherwise.”
Anyone can dispute it.
Now, that does not mean that everyone who disputes a beneficiary is successful. It just means that anyone can dispute it.
We’ve seen disputes involving medical issues. We’ve seen them involving divorce. We’ve seen unhappy children fighting with stepparents or surviving parents.
Anyone can dispute that designation, and it can hold up the payout of the policy.
At that point, the insurance company doesn’t want to pay the wrong person. Because what happens if they pay the wrong person? They may have to pay it again.
So they don’t want to make that mistake. They may pause the entire claim and review all of their records. If they’re still not sure what to do, they may tell the disputing parties, “You should talk to each other.”
And if they still can’t resolve it, the matter may ultimately go to federal court for the court to determine how those proceeds should be handled.
So anyone can dispute it, and it absolutely can cause a delay.
The minute that happens, everyone should seek counsel. Stop and say, “I need someone who understands this process to talk to me. How does this happen? What are our rights? Do they have a basis for their claim? What should we be doing next?”
Are you saying that most of these beneficiary disputes come from outside the insurance company, or are there also situations where the insurance company itself sees something on the paperwork and starts asking questions?
Obviously, when there’s money involved, someone might say, “Oh my gosh, I thought I was going to be the beneficiary.” And then I can see how the will and other estate planning documents might come into play.
Is it sometimes the insurance company and sometimes family members?
Yes, it’s both.
The situation that makes sense to all of us is when somebody outside of the insurance company calls and says, “Wait, wait, wait. I have a problem with this.”
But we’ve actually seen cases where the insurance company itself is looking at something. I have one pending right now where the insurance company was looking at a designated beneficiary and realized that at some point there had been a divorce and a remarriage.
The insurance company called the new spouse, who had no idea about the policy, and said, “You might have an interest in this policy.”
I’m not saying the insurance company was right or wrong to do that. But that was an example of someone inside the insurance company calling another person and saying, “We think you have a problem,” or, “You may have an interest in this. There may be a problem with this policy.”
It happens on both sides.
So they’re stirring it up?
In their defense, they would say, “We’re just trying to make sure we do the right thing.” So I’m not going to throw anybody under the bus on that one. It’s frustrating.
It’s interesting because I understand that the life insurance company needs to protect itself. They do have to do their due diligence.
I just think there’s a fine line. If the name is clear, the Social Security number is there, and this was the beneficiary, you wonder why they would start digging into it.
There’s probably more to the law and how all of this works, and I guess they have to cover their bases.
They do, and we respect the need to cover those bases. But we also feel that if there was a beneficiary designation and nobody was disputing it, there shouldn’t necessarily be a reason for everything to come to a halt.
Everybody is trying to be cautious or fight for what they believe should be theirs, and it can create this dynamic of long-term delay.
That’s really what this is: a long-term delay. The money is sitting there and it’s not being paid out.
I’d like to close out this conversation with some practical advice.
We might have listeners sitting here thinking, “Wow, that sounds awful. I have a life insurance policy that I put in place five years ago. I thought everything was fine.”
Not just specifically the beneficiary issue, because that’s something we can all relate to. When we set up a life insurance policy, the beneficiary is the whole reason we put the policy together in the first place, right?
Exactly. We want to make sure that the people we intend to receive the money actually get it.
What are some of the things someone should review? For example, sometimes people put down a beneficiary’s name but don’t include their date of birth or Social Security number. Are there certain things they should be checking?
Absolutely. The first thing I would encourage anybody to do is simply look at the policy.
When I was focused solely on estate planning, I would tell clients, “Give me a call every five years because a lot of life happens in five years. Let’s look at it and make sure your beneficiary designations are still correct. Is this still what you want?”
You have the right to update and change those designations, so make sure they still work with your overall plan.
Also, does somebody know about your policy? Even if it’s just your financial advisor, make sure someone knows the policy exists. Ideally, you should also have a family member who knows about it.
Another thing I would tell you to do is make sure your payments are being made on time. If the policy ever lapses and you reinstate it, you can potentially restart that two-year contestability period.
If you go into the hospital or you’re otherwise unable to manage your affairs and you’re receiving notices in the mail, do you have a backup person who can make sure the payments are being made?
That could be a family member, or you may be able to name your agent if you obtained the policy through an agent. The important thing is to make sure everything continues to be handled properly.
And when you fill out beneficiary designations through your employer, make sure they’re correct.
We’ve seen so many problems with this. We actually had one case where someone named themselves as the beneficiary, then named one child as a beneficiary, then removed that child on the same form and named another child as the contingent beneficiary.
That’s a whole big mess.
Was there confusion? Absolutely. What was the person’s intent? We have to go through all of those questions.
So just look at your policy. Talk to someone about it. Make sure it still reflects your wishes.
And I would also tell you: listen to your gut.
We have a lot of families who call us while the insured is still alive. Maybe the person is in hospice, and for whatever reason, the family is worried. They’re saying, “We think there’s going to be a problem. We think there’s going to be a dispute or a delay on this. Can you look at it? Can you talk to us?”
Sometimes we’re able to look at it and say, “We think you’re going to be okay.”
Other times, we look at it and say, “You’re right. Listen to your gut. Let’s start preparing for what we know is going to happen.”
Great stuff. Stephanie, this has been great. That’s all the questions I have for you today. Actually, it’s probably not. We could probably talk about this forever, but we’ll leave it there. I really appreciate you sharing your expertise with our audience today. This has been a really informative discussion.
Before we close, where can our listeners go to learn more about you and get in touch with you?
It’s one of those funny things where I feel like this niche is amazing. You’re one of those people I’m going to put into my Rolodex, and I hope I never have to call you. And I think that’s actually the best part about this conversation.
You want to have those people in your Rolodex where you think, “I hope I never have to call you, but if I do, I’m so happy I have you.”
With that said, is there a place where people can stay in touch, learn more about you, and get in touch with you directly?
Absolutely. Our website is lifeclaim.com. You can also reach me by phone at 615-3270.
I’m on LinkedIn under Stephanie Prestridge, and you can find us on Facebook or Instagram at lifeclaimwins.
Any way you want to contact us is fine. If you go to our website, my email is listed there. Almost everything comes directly to me, so you’re welcome to send an email through the website. If you call, you can ask for me directly.
We have wonderful attorneys and staff here, so I’m a lot of fun. You can ask for me, or you can talk to anyone in our office. We have a wonderful team.
Great. We’ll be sure to include all of that information in the resources section of the show notes. Thanks again, Stephanie, and thank you to everyone who tuned in to today’s episode.
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