North Carolina Life Agent Practice Exam

A claim denial in life insurance can occur due to several critical reasons that compromise the validity of the policy or the claim itself.

First, if a policyholder fails to pay premiums, the life insurance policy may lapse. A lapsed policy essentially means that the coverage is no longer active, and as a result, any claims filed would likely be denied because the insurance company is not obligated to pay out benefits if the policy is no longer in force.

Second, providing inaccurate information on the application can significantly impact the insurer's decision to issue a policy. When an applicant provides false information, whether intentional or not, it can lead to a denial of a claim. The insurance company relies on the accuracy of the information provided to assess risk; if they discover discrepancies, especially regarding material facts such as health conditions or lifestyle habits, they may contest coverage and deny claims.

Third, filing a claim after the policy expiration is a fundamental reason for denial. Insurance policies have specific coverage periods, and if a claim is made after the policy has ceased to be in effect (expired), the insurer is not liable to pay out since the coverage no longer exists.

Hence, all these factors contribute to scenarios where a claim might be denied, which is why the response indicating that