Life insurance is a critical financial tool for many families in the United States. It is important to tell the truth on applications because failure to tell the truth can void a life insurance policy. When a policy is void, it is as if it never existed.
As a recent Missouri case illustrates, the failure of an insured to give true answers on a life insurance application can result in a loss of the insurance policy when it comes time to collect the life insurance. In the case of Adams v. Stonebridge Life Insurance Company, the 8th Circuit Court of Appeals held that where a man who had purchased a life insurance policy gave false and misleading answers on an application in response to questions regarding whether he had any pre-existing mental disorders, the company could rescind the policy. The court noted that the insurance company justifiable relied on the man’s application answers, and therefore, the claim for benefits to the beneficiaries after the applicant’s death was proper.
The court’s deicision underscores two important points.
First, that the application is very important in the process of obtaining life insurance and will be relied upon by the insurance company in determining whether or not to insure a person, and the amount of premium that will be paid if the application is accepted.
Second, while subject to certain statutory limitations, an insurance company generally has the right to rescind the policy when the application answers were falsely made by the application.
Most states, including Missouri, have a non-contestability clause, under which, after a certain period of time has passed, answer will no longer form the basis for recession. However, as no one ever knows when they will die, it is an important practice to provide correct information when applying for life insurance, so that the benefit will actually be there when it is needed. When someone intentionally lies on an application it is unfair to the insurance company and voiding of the policy by a court is just and proper.
Unfortunetly, sometimes insurance companies attempt to use mistakes in an application as a reason to avopid paying legitimate claims. Mistakes rather than representations may occur where information is not known at the time of making the application, or when the information known and put in the application was believed to be correct but later is found out to be incorrect. Mistakes can also be injected by an agent or underwriter, and not from the actual insured applicant. In these cases, it is critical to determine whom the person entering the information into the application was acting for at the time. If the person was the agent of the insurer then the information will be charged to the insurer and cannot be used by the insurer to void the policy.
If you have lost a loved one and the insurance company is denying or failing to timely pay a life insurance claim contact the lawyers of Gump & Faiella for a no risk free consultation about your claim. Call now 1-800-264-3455.