I have a life insurance policy worth $1.5 million with my two kids as beneficiaries. I have a degenerative disease called Spinocerebellar Ataxia Type One, which was diagnosed one year before I bought the policy. It’s a rare condition that is not well-known.
The disease will have me bedridden at the end of it. When I pass away, will the company pay the death benefit? Or hold it back as I passed away due to a degenerative disease? As far as I remember, there was no place to indicate Ataxia on the signup form. There were questions about multiple sclerosis, which is better known.
I want to discontinue the policy if there is no benefit to it. I was diagnosed in 2014 and bought the policy in 2015.
-Desperate Single Mom
I can’t promise you with 100% certainty that your policy will pay the death benefit. But in all likelihood, your kids will get that money without issue.
For starters, it’s actually quite rare for insurers to delay life insurance claims or deny them altogether. In 2019, life insurance companies disputed about $600 million worth of new claims, according to the American Council of Life Insurers. That amounts to less than 1% of the $78 billion paid out to beneficiaries in the same year.
A denial is most likely to occur when someone dies within the two-year contestability period that’s typically in effect from the time you obtain your policy. Basically, if you die within that two-year window, the insurer can investigate your application for “material misrepresentation.”
That could include blatant falsehoods on an application, like lying about a cancer diagnosis or a drunken driving conviction, or saying you work a desk job when you really have a