Question 34

An insurer would be permitted to deny a life insurance claim when it is prohibited by law.

An insurer may deny a life insurance claim if the claim is not permissible under applicable laws. This includes situations where the policy does not comply with state regulations or when the circumstances surrounding the claim fall outside legal parameters.

A) When the beneficiary refuses to give consent

This option is incorrect because a beneficiary's refusal to give consent does not typically provide a legitimate basis for an insurer to deny a claim. Insurers are obligated to honor claims as long as they are valid and comply with the terms of the policy, regardless of consent issues.

B) When it is prohibited by law

This option is correct because insurers are bound by legal regulations that may dictate the circumstances under which a claim can be denied. If a claim contradicts statutory requirements or the insurance policy itself, the insurer has the right to deny the claim legally.

C) When the cause of death was an illness

This option is incorrect, as life insurance policies generally cover deaths resulting from illness unless specific exclusions apply. Most standard life insurance policies do not deny claims based solely on illness-related deaths, barring any pre-existing condition exclusions.

D) When the cause of death was an accident

This option is also incorrect because accidental deaths are typically covered by life insurance policies. Unless explicitly excluded in the policy terms (such as in cases of high-risk activities), insurers cannot deny claims just because the death was accidental.

Conclusion

In summary, the correct answer is that an insurer may deny a life insurance claim when it is prohibited by law, as legal compliance is paramount in the insurance industry. Other options fail because they do not align with standard practices regarding consent or the nature of death, which are generally covered unless specific exclusions are in place.