Life insurance offers peace of mind, but what happens when the claim is denied? In fact, Canadian insurers paid out a record $128 billion in claims in 2023, highlighting the importance of a life insurance payout. Unfortunately, many life insurance claims still get rejected due to preventable issues like non-disclosure, policy lapses, or overlooked exclusions. 

For Canadian seniors and their families, a denied life insurance claim can be devastating both emotionally and financially. In this guide, we break down why claims get denied, what red flags to watch for, and how seniors can protect their loved ones from unexpected surprises during an already difficult time.

Why do life insurance claims get denied for seniors in Canada?

While life insurance provides financial protection for your loved ones, insurers in Canada can deny claims for several preventable reasons. Some of the main reasons for life insurance claim denial in Canada include

1. Non-disclosure of medical history

Many life insurance claim denials in Canada occur because the policyholder failed to disclose pre-existing health conditions. Insurers rely on full medical transparency during the application process. 

If a senior omits information about chronic illnesses like diabetes, heart disease, or past surgeries, the insurer may consider it misrepresentation and deny the death benefit.

2. Missed premium payments

A lapse in premium payments can lead to life insurance policy rejection, regardless of how long the policyholder maintained it. Canadian insurers generally allow a 30-day grace period to catch up on missed payments. 

However, if the premium remains unpaid beyond this window and the policy lapses, any life insurance claim filed after the insured’s death will be automatically rejected.

3. Policy lapse before death

A lapsed life insurance policy offers no coverage, making any subsequent claim invalid. Seniors may accidentally let their policy lapse due to forgotten payments, outdated billing methods, or cognitive decline. 

4. Suicide within the contestability period

Most Canadian life insurance policies include a two-year contestability or exclusion period for suicide. If the policyholder dies by suicide during this time, the insurer may deny the life insurance claim and return only the premiums paid. 

5. Fraud or misrepresentation

Deliberate misinformation or falsification of details on the insurance application can lead to claim rejection, even after the contestability period has passed. This includes lying about age, smoking habits, medical diagnoses, or financial status. Insurers in Canada conduct thorough investigations, especially if the claim is filed soon after policy issuance, and they reserve the right to deny a life insurance claim if fraud is detected.

6. Wrong beneficiary details

Incorrect, outdated, or disputed beneficiary information can lead to delay or complete rejection of the life insurance claim process. If the named beneficiary is no longer alive, or if the form contains typographical errors or legal ambiguities, the insurer may withhold payment until proper verification is complete. 

7. Cause of death falls under policy exclusions

Canadian life insurance policies often contain an “exclusion clause”, which is a list of specific circumstances under which the insurer will not pay the death benefit. If the cause of death falls under any of these exclusions, the life insurance claim may be denied. Common exclusions include:

• Death due to criminal or illegal activity: If the policyholder dies while engaging in unlawful acts, such as drug trafficking, burglary, or armed assault, the insurance company may deny the claim
• Death resulting from high-risk or extreme hobbies: High-risk activities like skydiving, scuba diving, race car driving, or mountaineering are often excluded from coverage unless the policyholder purchases an additional rider to cover these activities
• Homicide involving the beneficiary: If the beneficiary is under investigation or suspected of involvement in the policyholder’s death, the insurer will typically place the life insurance claim on hold
• Death caused by war or military conflict: Some life insurance policies exclude deaths that occur during war, armed conflict, or military service
• Death during acts of terrorism or civil unrest: Deaths caused by terrorism, riots, or civil uprisings may not be covered by some insurance companies. Seniors who travel internationally should verify whether their policy contains such exclusions

8. Incomplete or inaccurate claim documentation

Even valid life insurance claims can be delayed or denied if beneficiaries fail to provide the correct paperwork. Missing documents like the original policy contract, death certificate, medical records, or proof of identity can lead to claim denial.

Are Canadian seniors at a higher risk of life insurance claim rejection?

Canadian seniors may face a slightly higher risk of life insurance claim rejection due to a combination of health-related and administrative factors. Seniors in Canada are more likely to have pre-existing medical conditions such as heart disease, diabetes, or cancer. If these health issues are not fully disclosed during the life insurance application process, insurers may consider it misrepresentation and deny the claim.

Seniors who purchase life insurance later in life also tend to choose no-medical or guaranteed issue policies, which often include a two-year waiting period. Claims filed within that period, particularly for natural causes, may be denied or receive only a limited payout.

Additionally, Canadian seniors are more prone to unintentional policy lapses due to missed premium payments or outdated payment methods. Seniors can reduce the risk of life insurance claim denial by working with licensed insurance advisors (such as our experts at PolicyAdvisor), staying current on payments, disclosing all relevant health information, and keeping beneficiary details up to date.

What does Contestability Period mean in life insurance claims?

The contestability period is a standard clause in Canadian life insurance policies that typically lasts for the first two years after the policy takes effect. During this period, the insurance provider has the right to thoroughly review any claim to verify the accuracy of the information provided in the application. 

If the insurer discovers misrepresentation, omission of health conditions, or false financial or lifestyle details, they can deny the life insurance claim or cancel the policy entirely.

This clause protects insurance companies from fraud or non-disclosure, especially when a death occurs soon after the policy is issued. After the contestability period ends, the insurer can only deny a claim in cases of proven fraud, making the policy much more secure for long-term beneficiaries.

How can seniors prevent life insurance claim denials in Canada?

Canadian seniors can significantly reduce the risk of life insurance claim rejection by following best practices throughout the life of their policy. Being proactive, transparent, and organized ensures that beneficiaries receive the intended death benefit without complications or delays.

Here are a few ways how seniors can prevent claim denials in Canada:

• Disclose all medical conditions honestly when applying: Seniors must provide complete and truthful medical information when applying for life insurance. Withholding details about pre-existing conditions can lead to claim rejection during the contestability period
• Ensure timely premium payments to keep the policy active: Missing even one payment may cause a policy lapse, resulting in denied claims. Setting up automatic payments helps maintain continuous life insurance coverage
• Review and understand all policy exclusions: Seniors should read the exclusion clause carefully to understand causes of death not covered by the insurer, such as death due to illegal activity, high-risk hobbies, or acts of war
• Update beneficiary details after major life changes: It is important to regularly review and revise beneficiary designations following events like marriage, divorce, or the death of a named beneficiary to avoid delays or disputes during claim processing
• Keep policy documents accessible for family members: Seniors should store their life insurance policy, payment records, and insurer contact information in a secure, accessible location to ensure a smooth claims process for beneficiaries
• Select a life insurance policy suited to age and health: Choosing between term, whole life, or guaranteed issue life insurance must be based on personal health status, budget, and coverage needs to prevent unexpected limitations in benefits
• Conduct annual policy reviews with a licensed advisor: Regular reviews help ensure the policy stays valid and reflects any updates in health, financial goals, or family structure, keeping the coverage aligned with the policyholder’s current needs

Does a policy lapse automatically lead to life insurance claim denials?

Yes, in most cases, a lapsed life insurance policy will result in an automatic claim denial. A policy lapse occurs when the policyholder fails to pay premiums within the grace period, typically 30 days in Canada. Once the policy lapses and the coverage becomes inactive, the insurer is no longer obligated to pay out the death benefit if the insured passes away during that time.

Canadian seniors should be especially cautious about maintaining active life insurance coverage. Missed payments due to forgetfulness or financial hardship can jeopardize their family’s protection. Setting up automatic payments or appointing a trusted contact to monitor policy status can help prevent unintentional lapses and reduce the risk of denied claims.

Does non‑disclosure of smoking habits lead to life insurance claim denials in Canada?

Yes, failing to disclose smoking habits on a life insurance application can lead to claim rejection in Canada. Life insurance companies classify this as a form of misrepresentation, as smoking significantly increases health risks and affects premium rates. 

During the contestability period, the insurer can investigate and deny a claim if it discovers that the applicant concealed their tobacco use. Canadian seniors should always disclose smoking or nicotine use honestly to avoid future disputes and protect their beneficiaries from claim denial.

Is a medical exam necessary to avoid life insurance claim denial for seniors in Canada?

No, a medical exam is not always necessary to avoid life insurance claim denial for seniors in Canada. However, full disclosure of any pre-existing health condition is mandatory. Many insurers offer no-medical or simplified issue life insurance options, especially for older adults. 

Even if no exam is required, seniors must provide accurate and complete health information during the application. Insurers can still deny a life insurance claim if they later discover omitted or false medical details. 

How can the beneficiary make a life insurance claim after a senior’s death?

Canadian life insurance companies require proof of death, identity verification of the beneficiary, and policy validation before releasing the death benefit. Here is a step-by-step guide on how a beneficiary can make a life insurance claim in Canada:

Notify the insurance provider immediately: Contact the insurer’s claims department by phone or email and report the death. To initiate the process, you will need to provide the policy number (if available), the full name of the insured, and the date and location of death.

Gather and submit essential documentation: The insurance company will require several key documents. These must be submitted either digitally or by mail, depending on the provider’s process.

Required documents:

• Original or certified copy of the death certificate issued by the provincial vital statistics office or funeral home. It must confirm the date, time and cause of death.
• Completed claim form that includes the beneficiary’s details, relationship to the insured, preferred payment method, and a declaration that the information is true and complete
• Proof of identity of the beneficiary, which may include a valid government-issued ID (e.g., driver’s licence, passport, or permanent resident card). Some insurers may also require proof of address
• Original policy document or policy number. If the original policy document is unavailable, provide the policy number and the insured’s full name and date of birth
• Medical records, coroner’s report, or autopsy report if the death is sudden, accidental, occurs during the contestability period, or involves suspicious circumstances
• Proof of relationship, in special cases when a beneficiary is not a spouse or child
• Beneficiary’s banking information, including a void cheque or direct deposit form with accurate banking details

Verify policy status and exclusions: Ensure the policy was active and in good standing at the time of death. Review the terms to confirm there are no exclusions (e.g., suicide within 2 years, high-risk activity, fraud) that could affect the payout.

Submit the claim through the correct channel: Insurers may accept claims via email, online portal, or physical mail. Follow their instructions closely and keep records of what you submit and when.

Track your claim and follow up regularly: Most life insurance claims in Canada are processed within 30 days, provided there are no complications. Keep in contact with the insurer to monitor progress and respond quickly to any additional requests.

What should a beneficiary do in case of a life insurance claim denial?

If a life insurance claim is denied in Canada, the beneficiary still has several legal and procedural options to appeal the decision and pursue the benefit. Life insurance companies must provide a reason for the claim denial. In most cases, beneficiaries can challenge it through proper documentation, legal channels, and expert guidance.

Things to do in case of a claim denial

• Request a detailed explanation from the insurer: If the denial letter lacks clarity, the beneficiary should formally request a comprehensive breakdown of the rejection. This includes accessing claim documents, underwriting notes, and policy exclusions
• Verify all submitted documents and beneficiary details: Ensure that all required documents were submitted correctly and that the named beneficiary matches the policy records. Administrative errors or outdated beneficiary information can be grounds for a claim dispute
• Consult a licensed insurance advisor or broker: An experienced life insurance advisor (such as our experts at PolicyAdvisor) can help interpret the reason for denial and provide guidance on next steps. PolicyAdvisor’s experienced advisors can help you reevaluate your claim application, spot any gaps in the application that may have resulted in denial and resolve your issue efficiently
• Submit a formal appeal to the insurance company: Beneficiaries can submit an appeal with additional documentation or clarification. Providing medical records, proof of premium payments, or affidavits can support the appeal process
• File a complaint with a provincial regulator: If the insurer does not respond fairly, beneficiaries can escalate the issue by filing a complaint with their provincial insurance regulator or the OmbudService for Life and Health Insurance (OLHI)
• Consider legal action if the claim remains unresolved: As a last resort, a beneficiary may take legal action against the insurer. A legal challenge may be warranted if the denial appears to violate the terms of the life insurance contract
• Keep all communication and paperwork organized: Maintain a detailed record of all emails, phone calls, letters, and submitted forms throughout the claims and appeals process. These documents will support any regulatory or legal escalation if needed