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'Survivor' Murder Case Has Insurance Angle

By Steve Thomas on June 15th, 2010

The case reads like a good page turner or perhaps more aptly, a good late night TV mystery thriller. Late last month, according to press reports, former Survivor producer Bruce Beresford-Redman's wife was found dead in Cancun during a vacation with her husband.

The reports state that Beresford-Redman took out two life insurance policies on his wife a week earlier and that their two children, aged three and five are the beneficiaries. And Beresford-Redman is allegedly a suspect in the case.

Life insurance and questionable death

While the details of this case are still unfolding and there are more questions than answers, it does raise an interesting question: What happens when there are questions surrounding the death of an insured?

What would television detectives like Columbo do? They'd scout around until they found an answer. With a little help from some knowledgeable insurance folks, I was able to uncover an M.O. that companies use when faced with a suspicious case.

Any time an insured dies and a claim is filed there is a routine investigation. From that routine examination, if any red flags are raised further analysis is done. If the death occurred in a foreign country, the company would work through the U.S. Embassy, and while deference is given to foreign law enforcement, permission might be requested to interview people involved in the case. Any additional information may assist police in their investigation.

Contestability period may come into play

A big dividing line is the two-year contestability period. What that means is that for up to two years, questions surrounding the policy can result in an insurance company rescinding a policy and returning premiums. Just being accused of committing a crime (innocent until proven guilty may not apply here) may be enough to rescind the policy. After the two year dividing line, the insurer has to be able to prove fraud.

If there is no proof of misrepresentation or fraud, an insurance company pays the death benefit and if a court case is underway, particularly if minors are involved, it is up to the court to decide how to handle the money and whether to allow it to be paid out to the guardian or to have a court appointed guardian control the funds.

For policies that are more than two years old, there is a general definition that fraud is obtaining something of value by misrepresentation, although the definition may be tweaked state-by-state.

Death benefit payouts in suspicious situations

In general, companies would also want to see what law enforcement officials uncovered and would wait to see if they could determine or not determine the circumstances surrounding the death. If a company deferred payment and then decided that there was a legitimate claim, a declared rate of interest is paid that is either stated in the contract or may vary according to state requirements.

There are two hurdles that may have to be met before the death benefit is made. Even if a criminal investigation clears a suspect and paves the way for payment, a civil case may provide sufficient cause for not paying out on a life insurance policy.

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