Denied Life Insurance Claim? The Real Reasons Why

This guide explains how often a denied life insurance claim actually happens in Canada, what the published numbers can and can't tell you, and the handful of reasons insurers most often refuse to pay. If you live in BC, it also walks through the specific rules in our provincial *Insurance Act* that decide whether a claim stands or falls. Knowing these rules before you apply is the single most useful thing you can do for the people you're protecting.

How often are life insurance claims denied in Canada?

The honest answer: nobody publishes a clean national denial rate. Insurers don't report one publicly, and I couldn't find a regulator that does either. What we do have are two numbers that give a sense of scale.

First, the money that does get paid. The Canadian Life and Health Insurance Association reported that Canada's life and health insurers paid out $18.6 billion in life insurance benefits in 2024 (CLHIA, 2025).

Second, the disputes. The OmbudService for Life and Health Insurance (OLHI) is the free, independent complaint service for this industry. In its 2025 Annual Report, covering the year ended March 31, 2025, OLHI reported:

• 1,470 complaint inquiries in total, of which 305 involved life insurance
• 338 complaints reviewed by its Complaints Manager, of which 74 involved life insurance
• 936 of the 1,470 complaint inquiries were about claims, across all product types

Set beside billions in benefits, those numbers are small. That suggests most life claims are paid. But please don't read it as a denial rate. Many families never escalate a refusal, some go straight to a lawyer, and OLHI's "life" category isn't limited to denied death claims. So the fair summary is: denials appear to be uncommon, but when they happen, the reasons are fairly predictable.

The real reasons a life insurance claim gets denied

1. Something wasn't disclosed on the application

This is the big one. Under BC's *Insurance Act*, the applicant and the person being insured must each disclose "every fact within the applicant's or person's knowledge that is material to the insurance," whether in the application, a medical exam or any written answers given as evidence of insurability (Insurance Act, s. 51). If a material fact is left out or misstated, the contract becomes voidable by the insurer.

In plain terms, a forgotten diagnosis, an unmentioned medication, smoking that wasn't declared, or a risky hobby left off the form can all give the insurer grounds to refuse a claim. It doesn't have to be a lie. An honest mistake can still matter if the fact was material.

2. The death happened within the first two years

That two year window is where nondisclosure really bites. Section 52 says that once a contract has been in effect for 2 years during the lifetime of the insured person, a failure to disclose or a misrepresentation does not, in the absence of fraud, make the contract voidable (Insurance Act, s. 52).

So in the first two years, an insurer can look closely at the original application when a claim comes in. After two years, that door mostly closes, unless fraud is involved. That's why a claim on a newer policy often takes longer to process.

One detail people miss: if you later increase your coverage or add to it, the Act treats that increase separately. A nondisclosure tied to the increase can void just the increase, and its own two year clock applies (ss. 51(3) and 52(2)).

3. The policy lapsed

A policy that has lapsed for non-payment can't pay a claim. The Act does give some breathing room. If a premium after the first one isn't paid on time, there's a grace period of at least 30 days (28 for industrial contracts), or longer if the contract says so. If the insured person dies during that grace period, the contract is treated as being in effect and the overdue premium can simply be deducted from the payout (Insurance Act, s. 50).

After the grace period, it gets harder. Reinstating a lapsed policy generally means paying what's overdue and, in many cases, showing evidence of good health and insurability (s. 57). Changed bank accounts and expired credit cards cause more lapses than you'd think.

4. An exclusion in the contract applies

Policies can contain exclusions, and the Act confirms that a suicide clause, one that voids the contract or reduces the payout if suicide happens within a set period, is permitted. If a lapsed policy is reinstated, that period starts again from the latest reinstatement (s. 56). The exact wording and length of any exclusion is in your contract, so it's worth reading that section rather than assuming.

5. The age on the application was wrong

A misstated age usually doesn't wipe out a claim. Instead, the benefit is adjusted up or down to what the premium would have bought at the correct age. The contract can only be voided if the real age was above the insurer's age limit, and even then only within 5 years and only while the person is alive (s. 54). Still, it's a surprise no family wants.

What to do if a claim is denied

Don't stop at the first letter. Here's a practical path:

• Ask for the reasons in writing, along with a copy of the application and any medical evidence the insurer relied on.
• Use the insurer's internal complaint process and ask for a letter with its final decision. The Financial Consumer Agency of Canada suggests having your policy number, key facts, the outcome you want and copies of documents ready, and keeping notes of every call (FCAC).
• Go to OLHI if you're not satisfied. FCAC points life and health insurance complaints there for a free, independent review (FCAC).
• Contact the provincial regulator if needed. In BC, that's the BC Financial Services Authority. FCAC notes you can approach your provincial regulator at any point in the process.
• Watch the clock. In BC, a lawsuit to recover life insurance money payable on death generally has to start by the earlier of 2 years after the claim evidence was provided and 6 years after the date of death (s. 76). If a lawsuit is a possibility, talk to a lawyer early.

It's also worth knowing that once an insurer has sufficient evidence of the death, the person's age, the claimant's right to be paid and the beneficiary's details, BC law says it must pay within 30 days (s. 73).

What this doesn't tell you

A few honest limits on everything above:

• There's no reliable Canadian denial rate. The OLHI and CLHIA figures measure different things, cover different periods, and can't be divided into a percentage.
• "Material" is a judgment call. Whether a missed fact was material to the insurance depends on the facts and, sometimes, a court's view. Two similar cases can end differently.
• Group coverage works differently. Life insurance through work or attached to a mortgage or loan follows different nondisclosure rules under the Act (s. 52(3)), and the contract terms matter a lot.
• This is BC law. Other provinces have similar legislation, but the wording and details can differ, and Quebec has its own system.
• Your contract is the final word on exclusions. I can't tell you what your specific policy says without reading it.

How to make your own claim easier to pay

Most of the protection happens at the start. Answer every application question fully, including things that feel minor. If you're unsure whether something counts, disclose it and let the underwriter decide. Keep a copy of your application. Set premiums to a reliable account and update it when you switch banks. Name your beneficiaries clearly and review them after big life events. And tell your family where the policy is kept.

Families across Burnaby, Coquitlam and the rest of Metro Vancouver often come to me after reading the fine print and feeling unsure. That's normal. An independent broker who compares several insurers can walk you through each application question so nothing important gets missed.

*This article summarises published rules and research for general information. It is current as of October 1, 2026, and is not personalized financial, tax or legal advice.*

Sources

• Province of British Columbia. *Insurance Act*, RSBC 2012, c. 1, Part 3 (Life Insurance), ss. 50, 51, 52, 54, 56, 57, 73, 76. BC Laws, current consolidation accessed 2026. https://www.bclaws.gov.bc.ca/civix/document/id/complete/statreg/12001_03
• OmbudService for Life and Health Insurance (OLHI). *Annual Report 2025* (year ended March 31, 2025). 2025. https://www.olhi-oap.ca/wp-content/uploads/2026/03/AnnualReport-2025.pdf
• Canadian Life and Health Insurance Association (CLHIA). "Claims in Canada rising: $143.3 billion paid to help keep Canadians healthy and financially secure." News release, September 23, 2025. https://www.clhia.ca/media-and-publications/news-releases/2025/Claims-in-Canada-rising-143-billion-paid-to-help-keep-Canadians-healthy-and-financially-secure
• Financial Consumer Agency of Canada (FCAC). "How to file a complaint with your insurance company." Canada.ca, modified July 15, 2026. https://www.canada.ca/en/financial-consumer-agency/services/insurance/make-complaint.html

If you'd like a second set of eyes on an existing policy or a new application, I'd be glad to help. Book a free, no-pressure call with me, in English or Tagalog, and we'll go through your questions together.