… incomplete and inaccurate … lack of disclosure
We’re not alone in stating that loss of a loved one is tragic, made all the more acute when due to a clerical error or undisclosed pertinent information, the expected insurance is no longer payable.
Too often the benefit enrolment form is not given the credence it deserves when it comes to the accuracy of the information. In some part that is understandable based on how the plan was communicated to employees; however, when it comes to major claims like death and disability, getting the information wrong is costly on many levels.
Dependent Life Insurance
In this situation the employer had a split plan with insured, Life, AD&D, Dependent Life Insurance ,and Long-Term Disability with an insurance company. The health and dental coverage were offered via a health spending account through a different benefit provider.
A single parent had been enrolled onto the benefit plan in the usual fashion, but unfortunately the employee didn’t want to “pay more for coverage” on their portion of the plan, so they declined to include information on their two children under the “insured” enrolment. This saved them $4.21 a month. Due to the health spending account being 100% corporately paid, the children were included for that coverage.
You already know where this is going. One of the children died. A dependent life claim was made and denied. Because the dependents were never listed with the insurer, the Dependent Life coverage was not activated and therefore no benefit payable.
Life Insurance and beneficiaries
In our next example, we have a long-term employee, hired in late ‘90’s who had had a couple of “life” events over their tenure, yet only sporadically updated their coverage, including their beneficiary. When this employee died, their current spouse had expected to be the receiver of the life insurance payable (300% annual salary) under the employee group benefit plan.
This was not the case.
After a divorce, the employee had updated their beneficiary to be payable to their three children equally at 33.3%. This is not 100%. The assignment left 0.1% unaccounted for. Doesn’t sound like much until you do the math, which amounted to $8,600. To further complicate the issue, on the form, the plan member had checked the box indicating that the proceeds are to be divided amongst the beneficiaries as per the percentage. In this case the insurer could not make any assumptions or changes, or simply continue to split the remaining funds equally without direct written consent and agreement from all of the beneficiaries.
A payment directive and release would be required and that is assuming all three beneficiaries get along, or if they wanted, they could request the additional funds go to the widowed spouse. The complications were endless.
Discloser
When medical evidence forms are completed, whether that be for additional Life Insurance, Disability or Critical Illness, full disclosure is not only expected, but mandatory. The insurers expect that employees will read their form, ask questions when they don’t understand, and be accurate in any relevant information provided. Negligence in this kind of situation will never be fully felt until the claim funds are needed and the previous disclosure (or lack thereof) is fact checked.
In this case a person suffering Stage Four cancer was declined because of lack of discloser on a specific question on the medical. The failure to disclose “any illness, disorder, injury, operation or treatment, meant the insurer was not given medical information necessary to properly underwrite the policy.” The claim was denied.
Allow us to show you how having “just in time” benefit education for staff members can make all the difference for them and the reputation of the corporation they work for when it comes time for major claims that change lives.
Invest the time initially to ensure employees fully understand their coverage and their responsibilities as well as those of the plan administrator for sustainable coverage that is truly a benefit.
We’d be pleased to engage in a meaningful conversation on this and other benefit topics. Give us a call.
Note: this was written without the aid of Artificial Intelligence (AI)
Disclaimer: Please note that the information provided, while authoritative, is not guaranteed for accuracy and legality. The site is read by a world-wide audience and employment, taxation, legal vary accordingly. Please seek legal, accounting and human resources counsel from qualified professionals to make certain your legal/accounting/compliance interpretation and decisions are correct for your location. This information is for guidance, ideas, and assistance.
