Most people see life insurance as a safety net for families, but insurers have built their business models to make steady income whether benefits get paid out at the end or not. The system is complex, but ultimately built for private companies to profit for years on almost every policy they sell. If you need help regarding a wrongful death claim contact our Aurora wrongful death lawyers today.
Premiums Are Invested Long Before Any Death Occurs
Every time you send in a bill for life insurance, that money doesn’t just sit there and wait until the day you might need it. Instead, insurance companies take most of the money they get and invest it, usually in lower-risk places like bonds, real estate, or government-backed securities. As long as the person paying for the policy is alive and keeps paying, the company is benefitting.
They’ve Already Collected More Than They Pay Out (On Average)
Life insurance is carefully priced to ensure the company collects more from customers than it ever expects to pay back in claims. Most policyholders pay premiums for years or decades without seeing a benefit paid out, sometimes cancelling before ever making a claim. Since only a portion of those policies leads to a payout, companies consistently bring in far more money than they remove from their total pool.
Many Policies Never Pay Out at All in Colorado
One often overlooked reality is just how commonly life insurance policies are never exercised, which is very costly for families and a windfall for insurers. Many people miss payments and let their policies lapse, often after years of paying. Others cancel because of financial hardship. Then there’s the other group of claims that are denied by the insurance company. Common reasons this happens include:
Application Errors or Misstatements
Applications require answers about health history, medical conditions, or lifestyle. Leaving out details about illnesses, medications, risky activities, or past diagnoses, even by mistake, can give insurers a reason not to pay.
Contest ability Period Deaths
If a death occurs within the policy’s “contestability window,” often the first two years, insurance companies review the application even more closely. If they find any inaccuracy or exaggeration, even unrelated to the cause of death, they may refuse to pay out.
Excluded Causes of Death
A life insurance policy often excludes very specific kinds of deaths. Suicide early in the policy, for example, is almost always a bar to recovery. Some policies also exclude deaths during risky occupations, extreme sports, or criminal acts. In these unfortunate situations, insurance companies may profit significantly while your family loses out.
The unfortunate reality is that insurance companies are allowed to put profits first. However, they are not allowed to unreasonably delay, day, or underpay victims in valid claims.They don’t necessarily profit directly from your loved one’s passing, but they absolutely profit from any payments you make for your policy.
Contact Our Aurora Lawyers Today for a Free Consultation
If you’re facing obstacles or feel an insurer isn’t treating you fairly, you don’t have to handle the situation alone. Contact Ridder Law LLC and we’ll schedule a free consultation with one of our attorneys at (303) 529-9662.