I think a life policy may be denied due to non disclosure by the deceased problem is this life policy was used as a collateral security to a bank, in this case who pays the bank? estate or will the bank negotiate with the assurer? Worried because it is tied to my prospects
Collateral security is property that the lender is entitled to seize if the borrower refuses to, or is unable to, pay the loan. If you are making the required payments on the loan (often equal monthly installments consisting partly of interest and partly of principal) and continue doing so until the loan is finally paid off in full, the fact that the life insurance policy did not get paid is irrelevant. You do, of course, need to disclose to the lender that the collateral has disappeared, and the lender may well call in the loan if, in the lender's judgment, you no longer have the wherewithal to continue making the payments and pay off the loan upon the terms agreed to. It all depends on the terms and conditions of the loan agreement (and the laws of the country where all this us occurring).
If the loan was taken by the deceased, not by you (who are merely the heir or executor of the estate and heir), and the life insurance policy was collateral for that loan, then that is a whole different question. The lender is a creditor of the estate, and must be paid before the remainder of the estate can be distributed to the heirs. But, once again, the exact terms and conditions of the loan need to be looked at, as well as who exactly was the beneficiary of the life insurance policy. The deceased? (and hence now the estate of the deceased?) the lender? the heir?