Life insurance contestability period
Life insurance contestability period

What Is The Life Insurance Contestability Period

By acquiring life insurance, you are providing financial security for your beneficiary in the event of your passing. But suppose that during the contestability period, you pass away not long after purchasing the coverage.

However, your insurer has the authority to check your application paperwork for errors while still paying out to your beneficiary.

Only when the insurer discovers deliberate misrepresentations in your application does contestability come into play. So, What is the Life insurance contestability period? Let’s find out in this post!

What is the Life insurance contestability period?

Life insurance contestability period
Life insurance contestability period

Following the effective date of your life insurance policy, the contestability period lasts for two years. This enables the insurance company to check your coverage for fabrications made during the application procedure.

Contestability guards against fraud for the life insurance business. The insurer wants to make sure you didn’t omit or tell lies during the application procedure regarding any aspects of your health or lifestyle.

The inaccuracies need not have anything to do with how you passed away. For instance, if you pass away from natural reasons but secretly had a history of drug or alcohol abuse, the life insurance company may reject the claim of your beneficiary.

What happens if you lie on a life insurance application?

Don’t panic if you make a simple error on your application, such as forgetting to name a prescription. There are chances to fix unintended mistakes.

The Life insurance contestability period was created to punish persons who suppressed or lied about information in order to benefit from the cheaper premiums intended for applicants who pose less of a risk.

Insurance companies can determine if you are being intentionally dishonest. Most people undergo a medical examination during underwriting, which usually includes standard blood and urine tests.

The medical information bureau (MIB), which accumulates data like previous operations and medical diagnoses using other insurance applications you’ve filled out, will also be compared by the insurance company with your assertions.

If the insurer finds out that you lied, this will appear on your MIB report as well and could result in future coverage denials from other insurers.

Even if you are still alive and after the Life insurance contestability period has passed, you risk losing your coverage if the life insurance company discovers an error in your application.

The greatest method to make sure your beneficiaries are safeguarded in the long run is to be absolutely honest.

What does contestability mean for the death benefit?

Life insurance contestability period
Life insurance contestability period

A claim may still be approved even if a life insurance company is looking into the circumstances surrounding a death.

The insurer may still pay the death benefit even if the data has some errors, or they may give a smaller benefit to make up for the greater premiums you should have paid.

This will occur if the error is modest, such as a slight discrepancy in your weight, but if the error is more significant, your claim may be rejected.

How does a policy lapse affect contestability?

The coverage for your loved ones will be lost if you don’t pay your premiums on time, at which point you’ll need to reapply for life insurance.

Due to your advanced age, your premiums will be higher, and the underwriting procedure will be repeated. A fresh Life insurance contestability period will likewise begin.

Your beneficiaries may not receive the death benefit if you lie on your new application and pass away within the first two years, just as they would have the first time.

What is the incontestability clause?

Even after contestability has ended, the life insurance company frequently has the right to withhold or lower your death benefit if they suspect dishonesty in your application.

Although some policies have an incontestability language that forbids insurers from looking at claims filed beyond the Life insurance contestability period, this clause is not universal. If you’re unsure if you have this protection, carefully read your policy or contact your insurer for assistance.

What is the suicide clause?

Life insurance contestability period
Life insurance contestability period

The first two to three years of your coverage are known as the Life insurance contestability period. Your life insurance policy also includes a “suicide clause,” which is a separate condition that also applies during this time.

If your death was contestable, the life insurance company has the right to look into it. If the cause of death was self-harm, the corporation has the right to deny your beneficiary’s claim under the suicide clause.

Suicide exclusions are there to stop people from purchasing an insurance with the goal to take their own lives and leave money for their beneficiaries.

Your insurance will pay the death benefit if you commit suicide within two to three years. The suicide clause period resets if you need to purchase a new insurance, just like the Life insurance contestability period did.

Contestability is not a means through which life insurance firms can penalize you for honest mistakes that are simple to fix. It’s used to track down anyone who willfully provided false information to the insurer in order to avoid having to pay higher rates.

Be honest when purchasing your policy so that your loved ones can receive the entire death benefit in the event of your passing.