What Happens If The Applicant Dies Before The Insurance Policy Is Issued?

life insurance claim

Life insurance can provide financial protection for family members and loved ones when a person dies. Generally, an applicant can apply for a policy and be approved within a short period of time; however, occasionally, the applicant unexpectedly dies prior to the policy’s issuance. Depending on the language of the pending policy and/or the agent or insurance company’s actions (or inaction), the policy’s intended beneficiary may be able to recover policy benefits despite the policy never being issued. Here are some things Louisiana Life Insurance Lawyers may want to consider if the intended beneficiary finds herself in this unfortunate position:

Effective date of the policy:

The effective date of a policy can vary depending on the policy’s language: A binding receipt contract will generally be effective on the date the application is completed and the first premium is paid. The effectiveness of this type of policy is often conditioned on the applicant being designated as insurable (i.e. after a medical examination). Alternatively, a policy may be effective on the date of actual delivery of the policy. Some policies also mandate that the policy can only be delivered if and when the applicant is in good health.

If the policy is being converted from a group life insurance policy to an individual life insurance policy (i.e. after a termination of employment or after the insured loses his status as an eligible member of group life insurance) and the applicant completes the individual policy application and supplies the first premium within 31 days of termination, the policy will still be effective if the insured dies during the 31 day period. Under this provision, the beneficiary is eligible to receive the benefits owed under the individual insurance plan although the claim is actually payable under the group policy. This is true regardless of whether the application was completed or the premiums paid.

Conditional receipt of a life insurance policy:

If an applicant completes a life insurance policy application, pays the insurance premium, and would ultimately be approved for the requested policy, the insurance company may issue a conditional receipt, which provides insurance coverage to the applicant during the time the application is being reviewed. Notably, a conditional receipt may limit the amount of coverage and the length of time the conditional policy is available to the applicant.

A conditional receipt is generally dependent on the applicant being designated as an acceptable insurable risk, which is generally determined by the insurer’s predetermined standards. The applicant may be ineligible for a conditional receipt if the insurer determines that the applicant cannot be insured under an acceptable insurable risk even if the applicant is insurable as an increased risk (and generally at an increased premium).

An applicant’s designation as an acceptable insurable risk may or may not be dependent on a medical examination. Some insurers do not require a medical examination if the applicant is under a certain age. Further, the policy may designate the date the policy becomes effective even if the applicant has already been categorized as an acceptable insurable risk.

Alternatively, an applicant may be able to obtain temporary coverage while the application is being processed. Temporary coverage pays benefits to the intended beneficiary if the applicant dies during the application processing period. Temporary coverage may be preferable to a conditional receipt because it pays benefits regardless of whether or not the applicant is ultimately approved for the policy. Temporary coverage generally requires a completed insurance application, payment, and that the applicant be in reasonably good health (i.e. applicant has not been hospitalized in the last 90 days or experienced any serious diseases in the last two years).