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Utah Life Insurance Claim Law: Interest From Death, a 10% Late Add-On and Contract-Based Bad Faith

Utah makes life insurers pay interest on death proceeds from the date of death, adds 10% a year once a claim sits unpaid past a 31-day window, and treats an insurer's bad faith toward its own insured as a breach of contract rather than a tort.

By Stephanie Prestridge

Not legal advice. This page summarizes sections of the Utah Code as published by the Utah Legislature and one Utah Supreme Court decision. Insurance Department rules and later case law are not covered.

Utah at a glance

  • Two layers of interest. A base rate from the date of death, then an added 10% per year once the claim is overdue (31A-22-428).
  • Reliance test for misstatements. The insurer must have relied on the statement, and it must be material or intended to deceive, unless the misstated fact contributed to the death (31A-21-105(2)).
  • Suicide. A two-year defense, but even then the insurer owes at least the premiums paid, less dividends, loans and withdrawals (31A-22-404).
  • Bad faith sounds in contract. Under Beck, an insurer’s failure to investigate and evaluate a first-party claim fairly is a breach of the policy, not a tort.

Interest on death proceeds: 31A-22-428

This section covers policies delivered or issued for delivery in Utah on or after May 5, 2008.

Base interest. From the date of death, proceeds earn interest at a rate no lower than the greater of (i) the rate the policy pays on funds left on deposit and (ii) the Federal Reserve’s Two Year Treasury Constant Maturity Rate. The rate is fixed as of the day of death, and interest keeps running until the claim is paid.

The 10% add-on. If the claim still is not paid, an additional 10% annually is layered on top of the base rate. It starts on the 31st day after the latest of these:

  1. the insurer’s receipt of proof of death;
  2. the insurer’s receipt of enough information to determine liability, its extent, and the payee legally entitled to the money; and
  3. resolution of any legal impediment that depends on people other than the insurer, plus the insurer’s receipt of evidence that it has been resolved.

Court-ordered interest. A court may instead order interest from the date of death at the base rate plus the legal rate in Utah Code 15-1-1(2).

Because the add-on clock turns on what the insurer “receives,” keep proof of every document you send and the date it arrived.

When a payment is not overdue: 31A-26-301

The timely-payment statute requires insurers to pay valid claims on time and expressly reaches people named as a beneficiary under a life policy or annuity. Payment is not treated as overdue while the insurer cannot find a recipient able to give a valid release, or cannot determine who is entitled, but only if the company promptly tells the claimant about the problem and offers in good faith to pay once it is cleared up. If an insurer is sitting on a claim because of a competing claimant, ask whether it sent that notice.

Contest period and suicide

  • Two years. An individual policy becomes incontestable after two years in force from its issue date during the insured’s lifetime (for survivorship policies, the surviving insured’s lifetime). Exceptions: nonpayment, accident-and-health provisions, and accidental-death benefits (31A-22-403). The section does not apply to group policies.
  • Increases and reinstatements. A purchased increase in the death benefit is contestable for two years after the increase, only on grounds connected with it. A reinstated policy can be contested for two years after reinstatement as to matters arising from the reinstatement.
  • Exclusions vs. contests. The time limit bars only challenges to the policy’s validity. An insurer may still assert in good faith a provision that excludes or qualifies coverage, but it may not recast a contestable issue as an exclusion to escape the deadline (31A-22-403(5)).
  • Suicide. Not a defense once the policy, or the later certificate, has been in force two years, whether the death was voluntary or involuntary and whether the insured was sane or insane. Within two years, the beneficiary still receives at least the premiums paid, minus dividends, indebtedness and partial withdrawals (31A-22-404).
  • Grace. At least 31 days (four weeks for premiums due more often than monthly), and the insurer must send termination notice at least 30 days before ending coverage, to the policyholder and to any designated third party (31A-22-402).

Application statements: 31A-21-105

Utah’s general rule for representations differs from the “material to the risk” language seen in many codes:

  • A misrepresentation affects the insurer’s obligations only if the insurer relied on it and it was material or made with intent to deceive, or if the misrepresented fact contributed to the loss (subsection 2).
  • Nondisclosure of information the insurer did not ask for is not a defense. A statement that becomes untrue and is not corrected within a reasonable time counts as misrepresentation (subsection 4).
  • An agent’s statements do not bind the insurer unless they appear in the policy or a written, signed application, and no one but the applicant may alter the application (subsection 1(a)).
  • If the insurer learns after issuance of facts giving it a general defense to all claims, it must tell the insured within 60 days (120 days if actively seeking medical records) that it intends to rely on the defense (subsection 5).

Subsection 5 is worth raising if the company knew of a problem well before the death and said nothing.

Unfair claim settlement practices: 31A-26-303

Utah splits its list. Three acts are unfair even once: knowingly misrepresenting material facts or policy provisions, using an application the insurer altered without the insured’s knowledge, and holding up one coverage to pressure settlement of another (that last one limited to people in direct privity with the insurer).

Other acts are unfair only when frequent enough to show a general business practice, including slow handling of claim communications, unreasonable investigation standards, forcing suit through lowball offers, no prompt explanation of a denial, duplicative proof-of-loss demands, and failing to settle in good faith when liability is reasonably clear.

The statute says it creates no private cause of action (subsection 5).

Beck v. Farmers: good faith as a contract duty (1985)

Wayne Beck’s auto insurer rejected his uninsured-motorist claim one week after receiving it, without explanation or a request for more facts. In Beck v. Farmers Insurance Exchange, 701 P.2d 795 (Utah 1985), the Utah Supreme Court reversed summary judgment for the insurer and:

  • declined to recognize a tort for first-party bad faith, holding the parties’ duties “contractual rather than fiduciary”;
  • said the implied covenant requires the insurer, at a minimum, to diligently investigate, fairly evaluate, and act promptly and reasonably in rejecting or settling;
  • allowed consequential damages reasonably foreseeable when the contract was made, which can exceed policy limits, and in unusual cases damages for mental anguish; and
  • noted that conduct breaching an independent duty, such as intentional infliction of emotional distress, may still support a tort claim.

Beck was an auto case between an insurer and its own policyholder. How it applies to a life-policy beneficiary is a question for a Utah lawyer.

Group life

Part 4’s incontestability section expressly excludes group policies, and this page does not summarize Utah’s group-life conversion rules. Out-of-state group policies covering Utah residents must conform substantially to a recognized group type (31A-22-510). For employer plans under federal law, see employer group life.

Time limits

Utah Code 78B-2-309 allows six years for an action on a contract founded on a written instrument. Check the policy for a shorter suit clause and read it alongside the statute.

Homicide: 75-2-803

Utah’s version (current text effective July 1, 2026) turns on a “disqualifying homicide”:

  • What counts. Any felony homicide offense in Title 76, Chapter 5, with elements established by a preponderance of evidence under the criminal code’s culpability and defense principles. Automobile homicide, including the handheld-device version, is excluded.
  • Effect. Revocable designations in favor of the killer are revoked and the instrument is read as if the killer disclaimed.
  • How it is decided. On petition, either a court finding by a preponderance of the evidence (unless disinheritance would create a manifest injustice) or a conviction with all direct appeals exhausted.
  • Freezing the killer’s assets. Before that determination, the decedent’s estate may ask for a restraining order, injunction, bond or constructive trust over the killer’s property (subsection 8).
  • The section also protects payers that act before receiving written notice; the notice goes to the payer’s main office or home by registered or certified mail.

Divorce: 75-2-804

Utah’s version of the uniform divorce rule is Utah Code 75-2-804. A divorce or annulment revokes a revocable designation in favor of the former spouse, or the former spouse’s relatives, in an instrument signed before the marriage ended. The instrument’s own terms, a court order or a property agreement between the former spouses can preserve it, and a later remarriage to each other revives it. A decree of separation that leaves the marriage in place does not count.

Until written notice of the divorce reaches the insurer, by registered or certified mail with return receipt to its main office or home or by service like a summons, a good-faith payment to the ex is protected. A former spouse paid without giving value must return the money to the person entitled to it, and the statute keeps that duty in place even where federal law preempts the revocation itself (Egelhoff).

Example

A Provo policy issued in 2015 pays out after the insured’s death in March. The insurer has the death certificate and claim form by April 1 but a competing claim is pending, and the court order resolving it reaches the insurer May 10. If it pays on August 1, base interest runs from the March death, and the extra 10% a year accrues from the 31st day after May 10 to payment.

Complaints

The Utah Insurance Department takes consumer complaints online or on paper: Complaints (Utah Insurance Department). Filing does not stop the six-year clock.

Sources

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.