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Alabama Life Insurance Claim Law: Interest After 30 Days, Misrepresentation and the Two-Year Clause

Alabama requires interest on a lump-sum death claim not paid within 30 days of proof, lets an insurer avoid a policy only for fraudulent or material misstatements, requires an insurer pleading misrepresentation to pay the premiums into court, and limits the suicide exclusion to two years.

By Stephanie Prestridge

Not legal advice. This is a summary, in our words, of Alabama Code sections as shown on the Alabama Legislature's ALISON site.

What is different in Alabama

Alabama’s interest rule starts when proof of death reaches the insurer, not at the death itself, and only once the 30-day payment window has passed. Alabama also puts a price on a misrepresentation defense: an insurer that pleads misrepresentation or fraud to avoid a life policy must pay all the premiums into court along with the plea.

The individual-policy rules below come from Article 1 of Chapter 15, which does not cover group, industrial or burial insurance (27-15-1). Group life has its own chapter, covered further down.

Contest period

Once an individual policy has been in force for two years from issue while the insured is alive, the insurer can no longer contest it, except for unpaid premiums. Disability benefits and extra accidental-death benefits may be left out of the clause at the insurer’s option (Ala. Code 27-15-4).

  • The two-year clause protects the policy’s validity only. Coverage exclusions and restrictions written into the policy remain available to the insurer even after two years (27-15-15).
  • After reinstatement, a new contest window opens only for fraud or material misstatements made to get the policy reinstated, and it lasts as long as the original one did (27-15-25).

Suicide clause and other exclusions

An individual life policy may exclude or limit coverage for how or where a death happened only for:

  • war or military action, or service in the armed forces of a country at war;
  • aviation or air travel;
  • specified hazardous jobs or hobbies;
  • death while living outside the continental United States and Canada; or
  • suicide, sane or insane, within two years from issue (27-15-24(a)(2)).

Even when one of these exclusions is triggered, the statute sets a floor: a reserve-based amount. If the policy has been in force no more than two years, the minimum is the gross premiums charged, less cash dividends and policy debt (27-15-24(b)). These limits do not apply to group life, disability, or accidental-death riders (27-15-24(c)).

Application misstatements

Alabama treats everything said in an application or in policy negotiations as a representation rather than a warranty. An untrue, incomplete or concealed answer blocks payment only when it was (27-14-7(a)):

  1. fraudulent;
  2. material, either to the insurer’s decision to accept the risk or to the hazard it covered; or
  3. a fact that, if truly disclosed, would in good faith have led the insurer not to issue the policy, or not at that premium or amount, or not to cover the hazard that caused the loss.

An insurer may not file a plea of misrepresentation or fraud in issuing a life policy unless it also pays into court all premiums paid on the policy (27-14-7(b)).

The policy and an attached application, or a summary of it, make up the entire contract. If a summary is attached and conflicts with the original, the original controls, and the insurer must keep the original for at least three years (27-15-5). No one but the applicant may alter a life application without the applicant’s written consent, except for clearly marked administrative entries by the insurer (27-14-6(d)). Getting the age or sex wrong does not void the policy; the payout is recalculated at the true figures for the premium actually charged (27-15-6).

Grace period and lapse

An individual policy must allow a grace period of 30 days, or one month of at least 30 days, for each premium after the first. Coverage continues through that window; if the insured dies in it, the insurer can subtract the missed premium from the benefit (27-15-3).

A policy that has not been surrendered, used up its cash value, or outrun its extended-term coverage can be brought back within three years after the missed premium. The owner applies in writing, shows the insurer acceptable health evidence, and pays back premiums and any policy debt, with interest capped at the policy loan rate (27-15-11).

Interest on death benefits

The policy must provide that a death claim is settled on due proof of death; the insurer may also ask for the policy itself and proof of who is entitled. If the policy names a time for settlement, it can be no longer than two months after the proofs come in (27-15-13(a)).

Once 30 days have passed since satisfactory proof of death and of the claimant’s interest reached the insurer without payment, and the beneficiary chooses a lump sum (paid directly or through a retained asset account), the insurer must pay interest on any money still unpaid (27-15-13(b)):

  • Start date: the date the insurer received due proof of death and of the claimant’s interest, not the date of death.
  • End date: the date of payment.
  • Rate: whatever the insurer is currently paying on death benefits that beneficiaries leave with it.

Annuities are excluded (27-15-13(c)).

Claim handling

When anyone claiming a loss asks in writing, the insurer must send proof-of-loss forms. Sending them does not make the insurer responsible for how they are filled in (27-14-26).

Alabama’s trade practices law makes it a violation to refuse, without just cause, to pay or settle claims so regularly that it amounts to a general business practice. The law lists evidence of such a practice: a substantial rise in complaints to the Department, a substantial rise in claimant lawsuits, and other relevant evidence (27-12-24).

Bad faith

The Alabama Code sections we reviewed do not create a separate damages action for a life insurer’s bad-faith refusal to pay; the claim comes from case law. In Chavers v. National Security Fire & Casualty Co., 405 So. 2d 1 (Ala. 1981), the Alabama Supreme Court recognized an intentional tort of bad faith in first-party insurance cases. In National Savings Life Insurance Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982), a health and accident policy case, the court set out what the plaintiff must prove, including:

  • an insurance contract and the insurer’s breach of it;
  • an intentional refusal to pay the claim;
  • the absence of any reasonably legitimate or arguable reason for the refusal; and
  • the insurer’s actual knowledge that no such reason existed, or, in the alternative, its intentional failure to find out whether one existed.

When a claim is fairly debatable, on the facts or the law, the insurer is entitled to debate it. In Dutton the insurer had denied the claim on a reported misstatement about the insured’s prior health, and the court held that this was an arguable reason that defeated the tort claim, leaving only the contract claim for a new trial. Neither case involved a life policy, so ask an Alabama lawyer how they apply to a beneficiary’s claim and what damages may be available.

Group life insurance

Alabama requires every group life policy to include the following (Ala. Code 27-18-3 to 27-18-14):

  • Grace: 30 days or more for every premium but the first; coverage runs through it unless the employer or other policyholder first told the insurer in writing that it was ending the plan (27-18-3).
  • Contest: the policy may not be contested except for nonpayment after two years from issue. A covered person’s statement about insurability cannot be used after their coverage has been in force two years during their lifetime, or at all unless it is in a written instrument they signed (27-18-4).
  • Copies: statements are representations. None may be used in a contest unless a copy went to the covered person or their beneficiary (27-18-5).
  • Conversion: someone who loses coverage when their job or eligibility ends may get an individual policy without evidence of insurability by applying and paying within 31 days (27-18-11).
  • Death in the window: if the person dies during the conversion period before an individual policy starts, the amount they could have converted is paid under the group policy, application or not (27-18-13).
  • Late notice of conversion: if nobody tells the person about converting until fewer than 15 days remain, the deadline moves, running 15 days from notice and capped at 60 days after the original deadline. Coverage itself is not extended (27-18-14).

Employer plans are frequently subject to ERISA, which can change the remedies and deadlines. More on that: employer group life.

Deadline to sue

Alabama’s six-year statute covers actions on written promises not under seal and on simple contracts not listed elsewhere (Ala. Code 6-2-34(4), (9)). An individual life policy may not set a shorter period than the statute allows for suing on the policy (27-15-24(a)(1)). That rule does not apply to group life (27-15-24(c)).

When the beneficiary caused the death

Alabama’s slayer statute cuts off any named beneficiary who feloniously and intentionally kills, or abuses, the insured. The proceeds go to whoever would take if that beneficiary had died before the insured (Ala. Code 43-8-253(c)).

  • “Abuse” here means a conviction for first- or second-degree elder abuse and neglect, or financial exploitation of an elderly person (43-8-253(e)(1)).
  • A final conviction is conclusive (43-8-253(e)(2)).
  • The insurer is protected if it pays by the policy’s terms before written notice of a slayer or abuse claim reaches its home office or principal address; after such notice it pays at its own risk (43-8-253(g)(1)).

Divorce and an ex-spouse beneficiary

Alabama has a statute that cancels an ex-spouse’s designation when a marriage ends, but only for divorces on or after September 1, 2015, when it took effect. Under Ala. Code 30-4-17, a divorce or annulment revokes a revocable designation of the former spouse, and of the former spouse’s relatives, unless the express terms of the instrument, a court order or a contract dividing the marital estate say otherwise. Alabama then carves out a life insurance case of its own: the section does not apply to a policy on which the former spouse is listed as owner, or on which the former spouse makes premium payments after the divorce (30-4-17(h)).

The date of the divorce decides whether the statute applies. In Blalock v. Sutphin, 275 So. 3d 519 (Ala. 2018), the insured bought his policy in 2011, added his new wife as a 50% beneficiary, divorced her in 2016 and died later that year without changing the form. The Alabama Supreme Court held that the divorce revoked her share, so his daughter took the whole benefit. Applying the statute to a policy bought before 2015 did not impair the contract, because the law set a default that the insured could undo by naming the ex-spouse again after the divorce. The court also applied Alabama law rather than Tennessee law, even though the policy was sold and delivered in Tennessee, because the insured lived, divorced and died in Alabama. And it rejected the ex-wife’s claim that a later common-law marriage to the insured revived her designation, because the trial court found no such marriage.

A divorce before September 1, 2015 is different. In Modern Woodmen of America v. Harris, No. 7:26-cv-00239 (N.D. Ala. Aug. 20, 2026), the insured named his then-wife on a certificate he applied for in Alabama in 1999. They divorced in 2003, and he died in Oklahoma in 2025 without changing the form. His widow argued that the divorce cancelled the designation. The federal court disagreed. The statute has no retroactivity clause and is triggered by the divorce itself, so a 2003 divorce revoked nothing. It did not matter that the insured lived for ten years after the statute took effect and never acted. The court applied Alabama law because the certificate was applied for there, and it awarded the proceeds to the former wife.

An insurer that pays the named beneficiary before receiving written notice of the divorce is protected. Where federal law displaces the statute, as it can for an employer plan (see Egelhoff), the section makes the person who received the money return it to whoever would have taken it under the statute (30-4-17(g)).

Worked example

An insured dies on February 3, 2026, and the beneficiary chooses a lump sum. The insurer receives the certified death certificate and the claim form showing the beneficiary’s interest on February 16. If it pays by March 18, no statutory interest is due. If it pays on April 30 instead, it owes interest at its deposit rate, counted from February 16, the date the proof arrived. If the insurer denies the claim for an application misstatement, it must show one of the three 27-14-7 grounds and pay the premiums into court with its plea.

Making a complaint

The Alabama Department of Insurance takes consumer complaints online: File a Consumer Complaint (ALDOI). Its page says it cannot help with a complaint once you have a lawyer, and it cannot step into a pending lawsuit. A complaint does not change any filing deadline.

Sources

  • Code of Alabama, Titles 6, 27 and 43, from the Alabama Legislature’s ALISON site: alison.legislature.state.al.us.
  • Alabama Department of Insurance, File a Consumer Complaint: aldoi.gov.
  • Chavers v. National Security Fire & Cas. Co., 405 So. 2d 1 (Ala. 1981) (full opinion, CourtListener): courtlistener.com. Read November 3, 2026.
  • National Savings Life Ins. Co. v. Dutton, 419 So. 2d 1357 (Ala. 1982) (full opinion, CourtListener): courtlistener.com. Read November 3, 2026.
  • Blalock v. Sutphin, 275 So. 3d 519 (Ala. 2018), No. 1170879 (full opinion, CourtListener): courtlistener.com.
  • Modern Woodmen of America v. Harris, No. 7:26-cv-00239-EGL (N.D. Ala. Aug. 20, 2026), memorandum opinion and order, ECF No. 30 (Justia): law.justia.com.
  • Code of Alabama 30-4-17 (Alabama Legislature, ALISON): alison.legislature.state.al.us.

Not legal advice. This page summarizes general rules and the specific statutes cited. Your policy's wording, the state whose law applies, and whether the coverage came through an employer can all change the result. See the disclaimer and editorial policy.