What is normally a very straight forward process, the filing of a life insurance claim by the beneficiary, can become a nightmare if the beneficiary is someone other than a family member. While this is only an issue during the two year inconestability period, it is never the less an issue that needs to be considered.

I am working on a claim for a client of mine right now that illustrates what the problem can be. She and her fiancee took out life insurance for each other a few years ago and he died about 6 months ago, within the period of contestability.

During that period the company has the right and almost always exercises the right to obtain medical records and research the claim to see if anything was misrepresented on the application. When the beneficiary is a family member, as part of the claim packet, they sign an authorization to release medical records. In the case of a fiancee, or significant other, or life partner, unless they have exercised a medical power of attorney, they aren’t a valid signer for that authorization.

In the case of my client she asked her fiance’s mother to sign the authorization and was refused. The mother it seems, goaded on by a sister, decided they didn’t like the idea that her son had intended to leave his fiancee life insurance proceeds, and not her. She did say that she would sign the authorization for half of the proceeds.

This has led to a now pending court date to have a judge give my client a limited power of attorney in order to allow the company to process the claim. OMG!

Bottom line. If you are insured and your beneficiary is not a family member, or if you are a beneficiary and the insured is not a family member, get a limited medical power of attorney just for this purpose, at the very least. A claim that should have been resolved in 4-8 weeks is now in the sixth month and will likely be at eight months before it is finally paid.