When you buy life insurance, you’re purchasing financial protection for your beneficiary when you die. But say you pass away shortly after taking out the policy, during the contestability period.
While your beneficiary should still get a payout, your insurer has the right to review your application materials for inaccuracies.
Contestability only applies if the insurer finds intentional misrepresentations in your application. For example, if you purposefully concealed a depression diagnosis, they can deny or reduce the death benefit.
Key takeaways
Contestability allows your provider to review your application for intentional errors after a death claim.
The contestability period only lasts for two years.
If you get a new policy or reinstate your policy after a lapse, contestability restarts.
Unless your policy includes an incontestability clause, you can still be punished for false information after two years.
What is the life insurance contestability period?
The contestability period lasts for two years after your life insurance policy goes in force. It allows the insurer to review your coverage for misrepresentations during the application process.
Contestability protects the life insurance company from fraud. The insurer wants to confirm you didn’t withhold or lie about any health or lifestyle-related information during the application process.
The misrepresentations don’t have to be related to your cause of death. For example, if you die from natural causes but also failed to disclose a history of drug or alcohol abuse, the life insurance company can deny your beneficiary’s claim.
What happens if you lie on a life insurance application?
If you made a simple mistake on your application, like forgetting to name a prescription, don’t worry. There are opportunities to correct unintentional errors.
The contestability period exists to penalize people who hid or lied about information to take advantage of the lower premiums meant for less risky applicants.
If you’re purposefully dishonest, insurance providers can find out. During underwriting, most people take a medical exam, which includes routine blood and urine testing.
The insurance company will also compare your statements against a report from the Medical Information Bureau (MIB), which compiles information like previous surgeries and medical diagnoses using other insurance applications you’ve completed.
If the insurer discovers that you lied, that will go on your MIB report too, which could cause other insurers to deny you coverage in the future.
If your life insurance company finds a misrepresentation in your application, you can still lose your coverage, even if you’re alive and even after the contestability period ends.
Being completely honest is the best way to ensure your beneficiaries are protected in the long run.
What does contestability mean for the death benefit?
Just because a life insurance company is investigating the circumstances around a death doesn’t mean that a claim will be rejected.
Even if the information contains some flaws, the insurer may still pay the death benefit, or pay a reduced benefit that accounts for the higher premiums you should’ve paid.
This will happen if the mistake is over something minor, like a small difference in your weight, but with bigger discrepancies, your claim could be denied.
How does a policy lapse affect contestability?
If you fall behind on your premiums, your policy will eventually lapse, and you’ll have to re-apply for life insurance to restore coverage for your loved ones.
You’ll pay higher premiums based on your older age and you’ll go through the underwriting process again. You’ll also start a new contestability period.
If you conceal information on your new application and die during the first two years, your beneficiaries could lose out on the death benefit just as they would the first time around.
What is the incontestability clause?
The life insurance company can often withhold or reduce your death benefit if they discover fraud in your application even after contestability ends.
But some policies include an incontestability clause that prevents insurers from investigating claims made after the contestability period. Read your policy thoroughly or ask your insurer for help if you’re unsure whether you have this protection.
What is the suicide clause?
Your life insurance policy also includes a “suicide clause,” which overlaps with the contestability period — the first two to three years of your coverage — but it’s a separate part of your policy.
Contestability gives the life insurance company the right to investigate your cause of death. The suicide clause gives the company the ability to reject your beneficiary’s claim if the cause of death was self-harm.
Suicide clauses exist to deter someone from buying a policy with the intention of harming themselves and leaving money to their beneficiaries.
If you die by suicide after two to three years, then your insurer will pay the death benefit. As with the contestability period, the suicide clause period resets if you need to get a new policy.
Contestability isn’t a way for life insurance companies to punish you for genuine errors that are easily corrected. It’s used to identify anyone who intentionally gave the insurer incorrect information to avoid paying higher premiums.
Be forthcoming when you’re buying your policy to ensure your loved ones can collect the full death benefit when you die.
If you or someone you know is in crisis, you can reach the National Suicide Prevention Lifeline by calling or texting 988. The service is free and available 24 hours a day, seven days a week. The deaf and hard of hearing can contact the Lifeline via TTY by using your preferred relay service or dialing 711 then 988. All calls are confidential.
Frequently asked questions
What is the contestability period?
If you die within the first two years of owning your life insurance policy, contestability allows your provider to review your application for intentional misrepresentations.
What happens when a life insurance policy is contested?
If an insurer contests a life insurance claim, they will deny or reduce the death benefit paid out to your beneficiaries and provide a detailed explanation as to why the claim was contested.
Can a life insurance company deny a claim after two years?
Your provider can usually cancel your policy or deny a claim due to fraud found on an application at any time, but it’s less likely they’ll investigate claims after the contestability period ends.
How long does the contestability period last?
The contestability period lasts two years. If you get a new policy or reinstate a lapsed policy, the two-year period restarts.
