If I die, will the company refuse to pay?
The life insurance industry holds the claim of having never failed to pay a valid claim. In most cases, a death claim is validated quite easily: if the insured is dead and the policy still in force, the claim is valid, and the death benefit will be summarily paid.
How many death claims are actually resisted
Occasionally, an insurer resists paying a death claim is resisted because it believes that the claim is invalid. Of the billions of dollars in death claims each year, though, only 0.00160% is actually contested. That's less than one percent of one percent. And 2/3 of that percentage is eventually paid anyway.*
What makes a death claim invalid
There are two reasons why a death claim could be valid (not counting the possibility that an insured is still alive).
First is that the circumstances of death fall under an exclusion. An exclusion is a clause in an insurance contract which stipulates circumstances which are not covered. For instance, a policy might exclude death while piloting a private plane. If the insured dies while piloting a private plane, then, the policy won't pay out. Any other death, however, will still result in a death benefit. Exclusions can be added to a policy to decrease the cost of insurance.
The second reason is that some fraud was committed in the application for insurance. Perhaps the applicant concealed the knowledge of a serious health problem. Even if the applicant commits fraud, however, the insurance company must catch the misrepresentation before the contestability period ends, and the fraud must be a material misrepresentation.
* These data are based on the ACLI tabulations of NAIC data from 2007.
