Reasons Why Life Insurance Won’t Pay Out [2025]

In a Ladder Life Insurance review, it’s clear that Liberty Mutual covers a wide range of perils, with fire being one of the most common. Whether it’s a minor kitchen fire or a major blaze, their insurance assists you in rebuilding and recovering. Additionally, Liberty Mutual protects against theft, ensuring your belongings are secure even if someone breaks into your home. If you’re concerned about life insurance not paying out, consider exploring options like life insurance that pays out if you don’t die.

Understanding what disqualifies a life insurance payment is essential to ensure that you don’t make a mistake that could cost your family financial security. Read more below about 10 reasons life insurance won’t pay out.

If you need help finding affordable life insurance rates, enter your ZIP code into our free quote comparison tool above to quickly obtain life insurance quotes.

10 Reasons Life Insurance Won’t Pay Out

So, what are reasons life insurance won’t pay out? Below are 10 reasons why your life insurance company may deny your claim.

1. The insured died by suicide.

Many states and life insurance companies include a suicide clause in their policies, which lists specific reasons, such as the beneficiary murdering the insured person, for which the insurance company won’t pay out. This can also affect Gerber Life Insurance death claims and result in insurance companies not paying death benefits.

A Prudential Life Insurance suicide clause typically outlines a specific period during which the policyholder cannot die by suicide for the policy to remain valid. If the policyholder dies by suicide after this period, which usually lasts between one and two years, the life insurance company will pay the death benefit. However, if the policy is not in force at the time of death, no payout will be made. For more information on this, you can refer to Securian Life Insurance payout after death reviews.

Read more: Life Insurance Death Benefit Explained

2. The policyholder lied or withheld information on the application.

If your life insurance application is not completely truthful, you may face a rejected life insurance application, find your policy canceled, have claims denied, or see your premiums increase. Life insurance rejection reasons and the percentage of life insurance claims denied can often be linked to inaccuracies in the application.

Each life insurance policy has a contestability period (often two years) in which the company will investigate all deaths that occur within that period. If the company finds that you provided false information or withheld information during an investigation, they may not pay the death benefit.

Suppose the insurance company discovers that you lied or withheld information either during the application process or after you have purchased the policy. In that case, they may cancel or deny your policy or raise your premiums.

In some severe cases, they may even deem your actions fraudulent.

Read more: What is life insurance fraud?

3. The policyholder stops paying the premiums.

If the policyholder stops paying premiums, the life insurance policy may lapse. Although many companies provide a grace period for premium payments, if payments are delayed too long, the company may cancel the policy and refuse to pay the death benefit. This scenario is one of the common reasons life insurance companies deny coverage and is listed among the circumstances under which life insurance will not pay. For more details, refer to the list of life insurance companies not paying claims.

4. The insured died from risky behavior or activities.

Life insurance companies acknowledge that some individuals enjoy engaging in risky activities like skydiving. However, they understand that these activities increase the policyholder’s risk, impacting the insurance company. Common reasons for life insurance claim denial include participation in such high-risk activities, smoking, and other factors. It’s essential to consider these when seeking life insurance quotes for skydiving.

If you participate in riskier hobbies or activities, you may be considered a high-risk individual for life insurance and should be up-front about it when you apply for life insurance. If you don’t tell the insurance company about it and pass away because of the activity, the company may deny the claim.

5. The insured died due to criminal activities.

If the policyholder dies while engaged in criminal activity or illegal actions, the life insurance company may deny the claim. Additionally, the company might refuse to pay if you die unknowingly committing a crime, such as trespassing on private property without realizing it. In such cases, understanding the denial of life insurance proceeds and the reasons for being denied life insurance is crucial. Consulting a life insurance attorney when the company won’t pay can help navigate these complex situations.

6. The insured dies by an act of war.

If your life insurance policy contains an “Act of War” clause, the company will likely not cover civilians who are killed due to war activities. For example, a journalist who travels to a conflict location will probably not get a payout if they die due to the dispute.

7. The insured moves outside of the country.

If you purchase a life insurance policy while living in the United States and then move outside of the country, the life insurance company may not pay your beneficiary if you die while living outside the United States.

8. The policyholder has no insurable interest.

When someone takes out an insurance policy on another person’s life, they must demonstrate insurable interest. The insurance company must also receive consent from the insured individual to issue the policy.

Insurable interest means that you have a financial dependence on the person or would otherwise suffer financial hardship if that person dies. For example:

• The spouse of the insured person who depends on their income
• The children of the insured person who live at home
• A business partner

If the insurance company issues a policy without insurable interest and then discovers the lack of insurable interest after the insured’s death, the company can still deny the claim by voiding the policy. The person taking out the policy may face fraud charges.

9. The beneficiaries don’t know about the policy.

If your beneficiaries are unaware of the policy, it doesn’t automatically mean the insurance company will refuse to pay out. However, this situation can complicate the process significantly. It may take years for your beneficiaries to receive the death benefit. This situation could be influenced by various factors, including the accelerated death benefit provision in a life insurance policy and reasons you may be declined for life insurance.

Life insurance companies typically attempt to keep track of the deaths of policyholders and track down the beneficiaries, but they may not do this very often.

10. Your ex-spouse was not removed as the beneficiary.

In some states, your ex-spouse may be automatically revoked as a possible beneficiary of your life insurance.

These states typically require that the spouse is removed as beneficiary after a divorce. If you intend to keep them as the beneficiary, you must notify the life insurance company. If you don’t, they may deny your ex-spouse’s payout.

What should I do if my life insurance claim is denied?

How often are life insurance claims denied? While only a small percentage of life insurance claims are ultimately declined, insurance companies like State Farm Life Insurance may dispute or investigate a larger proportion. Reasons for denial of life insurance coverage can vary and may lead to more claims being reviewed closely

If your life insurance claim is denied and you believe the insurance company lacks a valid justification for the refusal, you have rights to challenge it. You should start by reaching out to the life insurance company to request a detailed report or thorough explanation for the denial. Understanding the reasons life insurance companies deny claims can provide clarity, and may also highlight reasons not to buy life insurance if such issues are recurrent or unresolved.

Read more: What to Do if Your Life Insurance Claim Is Denied

You can then contact your state’s insurance department and the attorney general to learn more about the appeals process and how to contest the claim’s denial. Employees at these offices should have experience with appeals and be able to offer helpful insight.

If you decide to move forward with the appeals process, you should hire an attorney who specializes in insurance settlements and appeals.

If you need help finding life insurance that meets your needs, enter your ZIP code into our free quote comparison tool below to find a life insurance company in your area.

Case Studies: Reasons Why Life Insurance Won’t Pay Out

Case Study 1: The Insured Died by Suicide

John purchased a life insurance policy three years ago. Unfortunately, he battled with depression and took his own life. The insurance policy had a suicide clause stating that if the insured died by suicide within the first two years of the policy, the death benefit would not be paid out.

As John’s suicide occurred after the specified time, the life insurance company approved the claim and paid the death benefit to his family.

Case Study 2: The Policyholder Lied or Withheld Information on the Application

Sarah applied for a life insurance policy and intentionally provided false information regarding her smoking habits. A year later, she passed away due to lung cancer. During the investigation process, the insurance company discovered her deception. As a result, they denied the claim, stating that Sarah’s misrepresentation invalidated the policy.

Case Study 3: The Policyholder Stops Paying the Premiums

Robert had a life insurance policy for five years and always paid his premiums on time. However, due to financial difficulties, he missed several premium payments. The policy lapsed, and when Robert passed away, the life insurance company refused to pay the death benefit, as the policy was no longer active.

Case Study 4: The Insured Died from Risky Behavior or Activities

Emily was an adventure enthusiast and enjoyed extreme sports. She obtained a life insurance policy without disclosing her participation in these risky activities. Unfortunately, Emily died in a skydiving accident.

The insurance company investigated the claim and discovered her undisclosed hobby. As a result, they denied the claim, citing non-disclosure of relevant information.

Case Study 5: The Insured Died Due to Criminal Activities

Michael was involved in illegal activities and was killed during a robbery attempt. His life insurance policy specifically excluded coverage for deaths resulting from criminal acts.

Consequently, the life insurance company denied the claim, stating that Michael’s death occurred while engaged in criminal behavior.