Life Insurance Contestability Period: What to Do if the Insurer Contested Your Claim Under the Two-Year Clause?

Typically, life insurance companies pay out the policy proceeds as soon as the policyholder dies and the beneficiaries file a claim. However, if the death occurs within the first two years since the policy issue date – also known as the contestability period – the insurer is entitled to review the application answers for any misrepresentation. If they find significant inaccuracies, they can dispute the claim. 

However, not all claim denial reasons are ironclad. Even if the insured did get some facts wrong, there might still be a chance to collect the death benefits. If you find yourself in a similar situation, do not hesitate to seek legal advice. A free consultation will always be available at our law firm. Call us at (888) 510-2212 to speak with one of our life insurance attorneys.

If you want to learn more about the contestability period, we will explain in this guide what it is and what your legal options are if the insurance company denied your claim after investigating the application form.

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What Is the Life Insurance Contestability Period?

The contestability period is a period of two years from the date the policy was issued during which the insurer is allowed to review the application answers to make sure no material misrepresentation was made. The insurance company usually checks the decedent’s medical, employment, and criminal records to see if the insured made a mistake or even intentionally withheld vital information related to their lifestyle or health that could have had an impact on the company’s decision to provide coverage. 

The misrepresentation does not have to be related to the cause of death for it to be deemed a valid reason for a denied life insurance claim. For example, if the insured did not disclose his alcohol addiction and treatment on the application but died from cancer within the first two years, the insurance company can still deny the claim for material misrepresentation. Read more about life insurance payout for cancer-related deaths

The purpose of the contestability period is to protect life insurance companies against individuals who are committing fraud in an attempt to be perceived as less of a risk and receive life insurance or benefit from a lower premium rate.

What Happens if the Insurer Discovers Material Misrepresentation?

If no material misrepresentation was made, the insurer will pay out the death benefits in a timely manner. Read about what it means in our article on how long it takes for life insurance to pay out

On the other hand, if after the investigation is complete, the insurance company discovers material misrepresentation on the application, it has several courses of action which depend on the amount of the death benefit and the gravity of the misrepresentation:

  • If the misrepresentation would have led to a higher premium, they will pay the proceeds minus the additional premiums it would have charged had it known the new information. The insurance company will choose this approach if the misstatement is something minor such as an undisclosed check-up. 
  • If the insured purposefully omitted critical information that would have ended with a denial of coverage, the insurer would deny the life insurance claim and return to the beneficiaries the premiums that the insured had paid for the policy. One such misrepresentation would be not disclosing a chronic illness, criminal record, or diagnostic tests that revealed a serious illness. 

To be able to take any of these courses of action, some states require the insurance company to prove that the insured provided inaccurate information with the intent to mislead the company and benefit from it. In other states, however, that is not needed. Instead, the insurer is entitled to deny a life insurance claim if it can prove that the misrepresentation was material. 

All of this can be very confusing. We urge everyone going through a contestability investigation to consult with a life insurance lawyer who understands the contestability period in your state and can offer advice on how to win your case. Call us at (888) 510-2212 for a free confidential case evaluation.

If you want to learn more about what happens if the insurance company discovers inaccuracies on the life insurance application form, read our article about material misrepresentation and how it can affect your claim for death benefits.

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The Suicide Clause 

Most life insurance policies include a suicide clause that overlaps with the two-year contestability period but they are not related. 

The contestability clause enables the insurance company to investigate the application documents which may lead to a claim delay or denial. The suicide provision allows them to deny payment if the insured died due to self-harm within the first two years of the policy, regardless of whether the application was free of any material misrepresentations. Usually, insurers will return the paid premiums to the beneficiaries. After two years have passed, they will pay out even if the cause of death is suicide.

The Incontestability Clause: Can a Life Insurance Claim Be Contested after Two Years?

Once the contestability period ends, usually, policies become incontestable, which means that regardless of the cause of death (including suicide), the insurance company can no longer investigate claims–unless they strongly suspect that the insured committed insurance fraud or deliberately provided misstatements. The “incontestability clause” was put in place to protect insureds against companies who are trying to avoid life insurance policy payouts. That means that insurers cannot void or cancel the policy the way they had the right to during the first two years of the policy. 

Some changes to the policy may restart the contestability period. One of the most common such adjustments is when the life insurance policy lapsed. If the insured died within two years since reinstating the policy, then the insurer has the right to investigate the new application documents to see whether the information provided is accurate.

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What Happens if the Insurer Denied Your Claim After the Contestability Review?

To avoid paying death benefits, life insurance companies will use any inaccuracy they find on the application form to refuse payment of death benefits. But some inaccuracies are innocent mistakes that should not cause claim denial. That is why you should not take the denial at face value and contact a life insurance lawyer to protect your rights. 

At our law firm, we have considerable experience handling delayed and denied claims involving the contestability period and can offer the assistance you need to recover your proceeds. We can determine whether you have a case, help you understand your rights as a life insurance beneficiary, and explain your legal options. We know what insurance companies look for when they contest policies and relentlessly pursue claims that are under contestable review until we reach a satisfactory result for you. 

Our life insurance attorneys work on a contingency fee basis which means that we will not charge a fee unless we win your case. Only then will we charge a reasonable legal fee. We take pride in offering competitive contingent fee structures and will work with you to ensure you are comfortable with the fee.

If you or someone you know has issues with a delayed or denied life insurance claim, call us at (888) 510-2212 for a free, no-obligation consultation.

Here are a few cases involving contestable claims that we have successfully handled for our clients:

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About the author

Attorney Tatiana Kadetskaya has over 10 years of experience in life insurance law representing beneficiaries and policy owners. She is best known for successfully collecting denied and delayed claims and settling complex beneficiary disputes and interpleader lawsuits.

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