Florida law upholds the principle of good faith and fair dealing in all insurance contracts. When life insurance carriers delay, underpay, or deny valid claims, they may be held liable under Fla. Stat. §624.155 for bad faith conduct. Additionally, Fla. Stat. §627.455 enforces a two-year incontestability clause, limiting an insurer’s ability to void policies due to misstatements after that time.
What Is Life Insurance? How Do Life Insurance Policies Work?
Life insurance is a contractual financial agreement between a policyholder and an insurance company, designed to provide economic security for beneficiaries after the policyholder's death. In return for paying regular premiums, the insurer agrees to pay a tax-free death benefit to the designated beneficiary when the insured passes away. This benefit can:
- Cover funeral costs
- Replace lost income
- Pay off debts or a mortgage
- Fund education
- Provide long-term financial support to surviving loved ones
There are two primary types of life insurance policies commonly used in Florida:
- Term life insurance covers a specified period—typically 10, 20, or 30 years. The policy pays out the full benefit if the insured dies within the term. If the term ends and the policy isn't renewed, coverage stops.
- Permanent life insurance, which includes whole and universal life, offers lifelong coverage and may also include a cash value component that grows over time. This feature can be borrowed against or used to pay premiums, making permanent policies both a protection tool and a financial asset.
When the insured dies, beneficiaries must file a claim with supporting documents such as a death certificate. Florida law (including Fla. Stat. § 627.4615 and § 626.9541) requires insurers to process claims in good faith and pay valid claims promptly.
Policies are also subject to a two-year contestability period, during which the insurer may challenge the claim based on alleged misstatements in the original application. After that period, the policy generally becomes incontestable unless there is proof of intentional fraud.
