Understanding the Life Insurance Contestability Period (2024) (2024)

The life insurance contestability period typically lasts two years from the date of policy approval. During this time, an insurer has the right to investigate any aspect of a policyholder’s health that could have been misrepresented on their application. If it finds that information was intentionally withheld or falsified by the applicant, it can deny coverage or void the contract entirely.

The purpose of the life insurance contestability period is twofold:

• It serves as a deterrent against fraud by allowing insurers to thoroughly vet applications.
• It helps insurers spot any misrepresentation and helps control the cost of insurance due to misrepresented claims.

The contestability period exists on most types of life insurance policies, including term life and permanent life insurance policies.

The life insurance contestability period is an important part of the process as it allows the insurance company to investigate a beneficiary’s claim and verify its accuracy. This guarantees that the policyholder will receive a fair payout if their claim is accepted, and prevents fraudulent claims from being paid out. This also helps to keep premiums affordable for policyholders.

Additionally, the contestability period safeguards the integrity of the insurance company and ensures that it is not taken advantage of by claimants. By giving the insurer time to investigate all aspects of a claim, it can ensure that only legitimate claims will be paid out. Ultimately, this helps make sure that policies remain affordable for everyone involved.

What Happens If You Are Caught Lying on a Life Insurance Application?

If you are caught lying on a life insurance application, the consequences can be severe.

Depending on the specific details of the case, your policy could be canceled. Furthermore, insurance companies may deny future coverage for years and even initiate legal action against you if you have been dishonest about your information. If convicted of insurance fraud, you could face hefty fines and jail time in some cases. It is important to remember that any dishonest behavior in relation to a life insurance application can lead to serious repercussions that could last for years.

Common examples of dishonesty occur during the medical exam process where applicants may not share the entire truth. Or, they purposely apply for no-exam life insurance to try and hide a medical condition. If the insurer finds medical records that contradict the original information on an application, it may result in the denial of the death benefit to the beneficiary.

Many people assume that the contestability period is short and it may be hard for the insurance provider to challenge them. However, the truth is that the contestability period lasts two years from the date that the policy was issued. During this time, an insurer can challenge any claims made by the policyholder if they deem them to be incorrect or invalid. On the flip side, policyholders can request a review of their policy in order to ensure that they are getting the coverage amount they need and deserve.

Another misconception about the contestability period is if the insurance company cannot find something that you didn’t disclose, there is no more recourse for the insurance company. While this is not quite as common, it does happen. Here is an example: An insured stated on the application they were a non-smoker. Twenty years later, the insured died due to lung cancer. When the insurance company investigated the claim, it found that the person was smoking before and during their application for life insurance. The result was a reduction in the claim. The insurance company essentially went back 20 years and charged the appropriate smoker rating plus interest to the policy which substantially reduced the death benefit the beneficiaries received. This is an example of material misrepresentation and caused a change that affected the insured’s loved ones in a meaningful way.

One final example of a misconception about the contestability period is that agents can manipulate information to get the client the best deal. The insurance agent has a contract with the insurance company to represent its products to you, so they have an obligation to tell the truth.

If you tell the truth on your application, you likely have nothing to worry about.

The key to navigating the contestability period successfully depends on providing accurate information and disclosing all relevant information during the application process. This includes providing detailed answers about any pre-existing medical history or lifestyle factors which could affect your risk level, such as smoking cigarettes or participating in extreme sports or activities like skydiving. It is also important to make sure that any additional paperwork requested by the insurer is completed fully and returned promptly so that their investigation process can continue without delay.

Working with an experienced agent or broker who understands how life insurance works can also be helpful when navigating the contestability period. Not only will they help you understand what information needs to be disclosed on your application form, but they will also provide advice on how best to present yourself for underwriting approval in order to maximize your chances of success at claim time. Ultimately, having a professional on your side to help guide you through the process can make all the difference when it comes to ensuring your life insurance policy is fully protected.

Avoiding Policy Lapses

If you want to avoid lapsing your life insurance policy, it is important to carefully plan your finances.

Before you start the application process, do an analysis of your finances to determine how much you can realistically devote to premiums and other payments. Additionally, it is wise to keep track of payment deadlines so you don’t miss any payments or fail to renew the policy on time. If you’re able, setting up an automatic premium draft from your bank account is the best way to keep from missing a payment. If you ever have trouble making a premium payment, contact your life insurance company immediately so it can help you find solutions.

If you are unable to make your premium payment, you typically will have a 30-day grace period. The grace period is the time the insurance company will allow you to make up the payment before it cancels the policy. If canceled, you will have you go through a reinstatement process, which may require a repeat of the underwriting process. These events may cause the contestability period to start all over again.

The contestability period and the incontestability clause are two important features of a life insurance policy. The contestability period is typically two years from the date of application, during which time the insurance company has the right to investigate any information on the application that may be deemed inaccurate or fraudulent. If any inaccuracies or fraud are discovered, it can deny coverage or rescind the policy.

An incontestable clause states that after a policy has been in force for a certain amount of time (usually two years), it cannot be challenged by an insurer on any grounds unless there is definite proof of fraud at that time. Once an insurance policy becomes incontestable, even if a material misrepresentation was made when applying for coverage, it cannot be challenged.

Not every life insurance policy has an incontestability clause that removes a challenge to a claim, in whole or in part, if fraud is discovered.

The suicide clause typically states that if an insured individual takes their own life within a certain period of time after signing up for the policy, then the beneficiaries will not receive any benefits from the policy. This clause is usually in place to prevent fraud as it prevents anyone from taking out a life insurance policy solely to benefit their beneficiaries in the event of suicide.

In most states, this clause has a two-year window and overlaps with the contestability period, during which insurers can investigate any misrepresentations or inaccuracies on a policyholder’s application. This means that even if all relevant information was accurately disclosed at the time of application, if an insured party commits suicide within this two-year period, then the insurer can deny the claim. If a suicide occurs outside of this timeframe, it will be treated like any other cause of death.

Understanding the two-year contestability period is essential for anyone looking into obtaining life insurance coverage. It is important for applicants to disclose all relevant medical information, as well as facts about their lifestyle, accurately and honestly to avoid potential claim denials down the road during this two-year window after policy approval.

Whether you choose an affordable term policy or a comprehensive whole life policy, there will be a contestability period. An experienced licensed life insurance agent or broker can be helpful in navigating this period successfully. Ultimately, taking these extra steps will help ensure that your life insurance policy is properly protected, leaving you and your family with peace of mind.

Methodology: Our System for Ranking Life Insurance Companies

Our team researches and ranks life insurance companies using an in-depth scoring system that considers the factors most important to consumers like you. Our analysis includes a comprehensive review of each provider we feature based on available coverage, customizability, availability, customer service and company reputation. Here are the factors we take into consideration when rating life insurance providers:

• Brand trust (40%): Life insurance payouts can exceed $100,000 or more, which makes choosing a reputable and trustworthy insurance provider important. To assess brand trust, we use J.D. Power and Associates customer satisfaction surveys, AM Best credit rating scores and the National Association of Insurance Commissioners (NAIC) complaint index. The higher a company scores in each area, the more points it receives.
• Coverage (33%): The more policy options a life insurance company offers, the more opportunities you have to obtain the right coverage for your specific needs. For this reason, we give companies the most points for offering multiple types of life insurance, including various term, permanent and no-exam options.
• Availability and ease of use (19%): Since life insurance coverage options can be complex, we consider the ways a customer can reach a company — and how easy communication is. For this category, we research how many communication channels a company offers for general customer support, claims processing and the application process. Companies earn the most points for offering various ways to interact with an agent, both in-person and online.
• Riders (8%): Companies offering various life insurance riders or endorsem*nts allow policyholders to better customize their coverage. In this category, we determine how many riders a company offers and award the most points to providers with more than 10 options.

We use our rating system to compare and contrast each company against key factors to help us determine the best life insurance companies in the industry. To learn more, read ourfull life insurance methodologyfor reviewing and scoring providers.AM Best Disclaimer