The Contestability Period in Life Insurance: Why the First Two Years Matter
For a limited period after a life insurance policy starts, usually two years, the insurer can investigate and contest a claim based on misstatements in the application. Here is how it works and how to protect your beneficiaries.
Life insurance policies generally include an incontestability clause. For a set period after the policy is issued, commonly two years, the insurer can review a death claim and challenge the policy if the application contained material misrepresentations. After that period, the insurer's ability to contest the policy is much more limited. State law generally governs these provisions.
How it works
- Application. You answer health, lifestyle, and history questions.
- Policy issued. The contestability period begins, commonly two years.
- Claim within the period. Insurer may review medical records and the application before paying.
- Period ends. The policy generally becomes incontestable except as allowed by law, such as for nonpayment.
If a death claim is filed during the contestability period, the insurer may request medical records and compare them with the application. If it finds a material misrepresentation, meaning an inaccurate answer that would have changed the insurer's decision to issue the policy or its price, it may deny the claim or rescind the policy, typically refunding premiums paid.
A misrepresentation doesn't need to be related to the cause of death to matter in many states, as long as it was material to underwriting. Some states require intent to deceive; rules vary.
Related clauses
- Suicide clause: most policies exclude death by suicide within a set period after issue, commonly two years, typically refunding premiums. Rules vary by state.
- Misstatement of age or sex: rather than denying a claim, policies usually adjust the death benefit to what the premiums would have bought at the correct age or sex.
- Reinstatement: reinstating a lapsed policy can start a new contestability period for information given in the reinstatement application.
- Replacement: replacing a policy starts a new contestability period on the new policy.
How to protect your beneficiaries
- Answer every application question accurately and completely, including medications, diagnoses, tobacco use, and risky activities.
- Review the application before signing, even if an agent filled it in.
- Keep a copy of the application; it's usually attached to the policy.
- Be cautious about replacing an existing policy that's already past its contestability period.
See also how much life insurance you need.
The takeaway
During the first years of a policy, usually two, an insurer can investigate claims and challenge material misstatements in the application. Accurate applications are the best protection for your beneficiaries, and replacing a policy restarts the clock.
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