What is a life insurance contestability period?

If the life insurance policy holder dies within the contestability period, the life insurance company will investigate whether the insured provided accurate information on the policy application. The insurance company has the option of denying payment of the policy death benefit if it can prove that the policy holder made a material misrepresentation or omission. This varies from state to state. In some states, the insurance company must show that the applicant intended to mislead the insurance company. In other states, the insurance company does not need to prove an intent to defraud. It just needs to prove that a representation or omission was material.  The misrepresentation or omission need not be causally related to the event of death.

How long is the contestability period?

The life insurance contestability period begins as soon as a life insurance policy is issued. It is one year in some states and two years in most states and it begins as soon as a policy goes into effect. The life insurance contestability period is a short window in which insurance companies can investigate and deny claims.

What if you didn’t submit correct information on your application?
Don’t lie on your life insurance application to get lower rates, betting you’ll live through the contestability period. It could hurt your claim.

Does the insurance company have to honor the contract if you die during the contestability period?

Life insurance companies can investigate ANY claim during the contestability period to make sure the policy was issued based on accurate information. This insurance company has an obligation to pay the death benefit if everything is correct. The insurer has to pay your claim even if you die an hour after the life insurance policy goes into effect.

Would the life insurance company could pay the claim even if you got some facts wrong?

If an investigation finds you misrepresented facts on your application, the insurer has a couple of options.

  1. It can figure out how much premium you should have been paying based on the new facts and reduce the death benefit by that amount.
  2. Or the insurance company can deny the claim.

The decision will depend on the size of the claim and how blatant the misrepresentation. These are generalized approaches and vary depending on the law in your state.

Could you get in trouble if you commit fraud and live beyond the contestability period?

Yes, in some states.

Is the contestability period a separate issue from the suicide clause?

The suicide clause often gets confused with the contestability period, but the two are separate issues. If the insured commits suicide, typically within the first two years of the policy, the life insurance company will not pay the death benefit and will return premiums. After two years, the policy will pay out even if the cause of death is suicide.