Imagine paying for life insurance year after year, believing your family will be protected—only to have the claim denied when they need it most. It’s a devastating scenario, and unfortunately, it’s more common than many people think. When I first learned about claims denial in VUL insurance, it shook me. Could all that effort really amount to nothing if I made a simple mistake?
What Is VUL Insurance, Again?
VUL insurance is a hybrid financial product—it combines life insurance protection with an investment component. You pay premiums, part of which goes to your life coverage, while the rest is invested in mutual funds of your choice. Over time, the policy builds cash value that can help support long-term goals, like retirement or education.
But let’s focus on the core reason many people buy a VUL: the death benefit. That’s the money your beneficiaries receive if you pass away. Unfortunately, there’s no guarantee they’ll actually get it if a claims denial occurs.
What Causes Claims Denial in VUL Insurance?
Let’s dive into the reasons why VUL insurance claims might be denied—because once you know the risks, you can take steps to avoid them.
1. Misrepresentation or Non-Disclosure
This is the leading cause of claims denial. If you failed to disclose a medical condition, smoking habit, or risky occupation when applying, your insurer might refuse to pay the death benefit—even years later. I once met someone whose claim was denied because their loved one didn’t mention they had been treated for high blood pressure.
2. Lapsed Policy Due to Unpaid Premiums
Unlike traditional life insurance, VUL policies can lapse if there isn’t enough value in the investment portion to cover ongoing insurance charges. If your investments underperform and you don’t top up the account, the policy could expire without you realizing it.
3. Death During Contestability Period
Most policies have a two-year contestability period. If you pass away during this time, the insurer can review your application in detail. If they find any inconsistencies, the claim could be denied—even if the issue seems minor.
4. Exclusions in the Fine Print
Some policies won’t pay out for deaths related to suicide (within a certain timeframe), war, criminal acts, or high-risk hobbies like skydiving or deep-sea diving. Always read the exclusions section carefully. It may be boring, but it’s essential.
5. Incorrect Beneficiary Designation
If your beneficiary information is outdated or unclear, the claim could get delayed—or denied altogether. This often happens after divorces or family disputes, when the legal standing of the listed beneficiary is questioned.
How to Avoid a Claims Denial
Here’s what I’ve learned from both insurance advisors and real-life stories that could save you and your loved ones a great deal of heartache:
1. Be 100% Honest in Your Application
This means disclosing all health issues, medications, lifestyle habits, and even your travel history. It’s better to face a higher premium now than risk a denied claim later.
2. Monitor Your Policy’s Cash Value
If your investments dip and your policy can’t cover insurance costs, it might lapse. Set annual reminders to review your statement or meet with your advisor.
3. Keep Beneficiary Information Up to Date
Update your beneficiary list when major life changes happen—like marriage, divorce, birth of a child, or death of a listed individual.
4. Understand the Exclusions
Take the time to read what’s not covered. Ask your insurance provider to explain anything you don’t understand. Trust me, there’s no such thing as a stupid question when your family’s financial future is on the line.
5. Get Written Confirmation
Any changes you make—like increasing coverage or changing beneficiaries—should be acknowledged in writing by your insurer. Keep records in a safe place and let your family know where they are.
What If a Claim Is Denied?
If a claim is denied, your beneficiaries don’t have to take it lying down. They can:
- Request a detailed explanation of the denial
- Submit additional documents or evidence
- File an appeal within the insurance company
- Seek legal help or contact the insurance regulatory body in your country
In some cases, denied claims can be reversed, especially if the denial was based on technicalities or poor communication.
Personal Reflection: Why I’m Extra Cautious Now
I bought my VUL policy to protect my family—not just financially, but emotionally. I don’t want them to suffer through an administrative nightmare while grieving. That’s why I’ve double-checked every document, met regularly with my advisor, and communicated openly with my loved ones about the policy details.
It may seem like overkill, but I believe this level of diligence is an act of love. It says, “Even when I’m gone, I’ve still got your back.”
Important Disclosure
Disclaimer:The details regarding claims denial, contestability periods, beneficiary rules, and exclusions can vary significantly from one insurance company to another, from one product to another, and from one country to another. Always consult a licensed insurance professional in your local jurisdiction before making decisions.
Final Thoughts
VUL insurance is a powerful tool—offering both life protection and investment growth. But it’s not foolproof. Understanding the risks of claims denial isn’t about being negative. It’s about being prepared. Because preparation is what ensures that your legacy lives on in the way you intended.
If you’re thinking of buying VUL insurance or already have a policy, take the time today to review the details. Ask questions. Double-check the small print. And most of all, talk to your loved ones about your plan.
Because when it comes to VUL insurance, what matters isn’t just having it—it’s making sure it delivers when it matters most.