Life insurers paid out $38 billion in death benefits last year.* This money ensured the financial security of American families and small businesses. It helped those deprived of a spouse’s income pay their mortgages and those deprived of a mother or father pay college tuition. It fulfilled promises that insurers and insurance agents made to their clients when the policies were purchased.
Yet, a Sunday Los Angeles Times story cited approximately 5,000 denied or disputed claims involving policies worth $372 million last year and concluded that life insurance companies refusing to pay “was not unusual.” This is alarming, given that the entire premise of life insurance hinges on consumers’ trust that the companies will uphold their end of the bargain and pay benefits when they are due.
Not surprisingly, when you really look at the Times’ numbers a different story emerges. In fact, denied claims are very, very unusual. Based on the same data from the Times article, the value of denied or disputed claims is less than 1% of the benefits that the companies paid out to beneficiaries.
Sadly, the stories of a small number people whose claims were disputed are apparently more newsworthy than those of the hundreds of thousands who were able to keep their businesses or their homes or standards of living thanks to life insurance benefits.
Additional Resource:
- For just a few examples of how life insurance has helped people in times of need, check out these realLIFEstories.
*At least $38 billion. This is the number the Times says it got from NAIC data. LIMRA says life insurers paid death benefits of nearly $59 billion in 2009 (you may need to sign in as a LIMRA member to view this link); the Insurance Information Institute says life insurers paid death benefits of $71.4 billion in 2008.