- 19,035
I've been an expert witness -- as a life insurance professional, not as an attorney -- on several cases in and around the two-year contestability period. I've testified several times on this. Everyone is entitled to an opinion, and you can say all you want, but an expert opinion, from a qualified expert, offers a qualified opinion. That said, while every contract may contain different contract language -- and the policy is in fact a contract -- typically a life insurance company, within the first two years, has the right to review the (death) claim, and review the application and underwriting process, documents, etc., for any reason whatsoever. However, they only, typically, have the right to contest and deny the claim for any material or substantial misrepresentation(s). If they find that, they can dispute the claim.
Not all claims that are denied are black and white. Even if the insured lied -- about being a smoker for example -- while that sound or seem like a material misrepresentation, that in and of itself is may not have been cause for the company to deny coverage, and as such deny the claim. I have had three cases where they paid, but subtracted the difference in premium between smoker and non-smoker from the death claim proceeds. So, even if there is a misrepresentation, a lie, an inaccuracy, etc., they may still pay the death claim. If you are in a situation where a claim is being contested, and then denied -- seek legal counsel! Period.
You are correct that companies will settle sometimes on contestable claims that they initially denied.
I can think of several FE denials that could probably have been overturned in full or in part if challenged by legal representation.
But most FE claims will go unchallenged just because of the value. The companies not only know this, they depend on it.
But I do know of a $10K claim that was denied recently and the family did fight it and sued the company and agent.
It really shook the agent. The company settled. They didn’t pay the full $10K. I’m not sure how much they paid. They didn’t settle on the courthouse steps, but damn close.
I’m sure people fight the higher face claims more often.