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What Are the "Contestable and Incontestable Periods" in My Life Insurance Policy?

Life insurance policies are all mandated by law to have only a short window in which the company can rescind its benefits, which is known as the "contestable period."  While the laws governing the contestable period vary from state to state, the period is never longer than two years.  This means that if you die within two years of acquiring your policy, the insurance company can, and often will, refuse to pay any benefits until it has concluded a thorough investigation surrounding your death. The company will also closely scrutinize your application forms and your medical records, looking for any disparities with which to contest your policy. If it finds sufficient misrepresentations, it may also alert prosecutors and bring you up on criminal counts of insurance fraud (in addition to keeping all of your benefits and premiums). 

What Happens after Two Years?

After you have had the policy for two years, it becomes "incontestable", which means it is, essentially, impossible for the company to refuse to pay the benefit, except under extraordinary circumstances, even when fraud was committed in acquiring the insurance.   

For example, if you recently discover you have a fatal cancerous tumor, and you apply for life insurance without mentioning it, not having it noticed during the physical or a background check, AND you manage to survive for at least two years, the insurance company must pay out the benefit in most states, even if it can prove that you purposely lied on your application.  

Why Do Most People Refuse to Lie on Their Insurance Applications?

There are several serious issues that would usually prevent most people from lying on their insurance applications. First of all, insurance fraud is a crime, which means that if someone discovers what you have done before you die, you can end up in jail. Even worse, if someone else submitted the application for you, such as your spouse, then THEY could go to jail even after you die.  

Aside from that, there are several exceptions where the incontestable rule does not apply:

  1. Age: Unlike other material misrepresentations, lying about your age is not protected by the two year rule. However, if it is discovered after you die, usually state law forbids the company from canceling the policy outright, it will simply adjust the benefit to what you would have received if you had accurately represented your age, minus the missed premium costs.
  2. Impostor: In some states, if you have an impostor take a physical exam for you in order to get life insurance, then this will automatically nullify the policy, regardless of when it is discovered.
  3. Deaths not covered by policy: It is important to remember that all these rules only apply to deaths that are actually covered by the policy.  Suicide, for example, will almost certainly be expressly excluded in the policy, so if it is discovered that the death was the result of suicide, the insurance company will not be required to pay any benefits.

Do I Need a Lawyer?

Life insurance companies are infamously slippery when it comes to the precise dates of incontestability, and will look for any sort of loophole they can find in order not to pay out a benefit. If you think you are being unfairly denied your benefits under a policy, you should contact an attorney immediately to discuss the possible remedies, and whether you can force the company to pay out, or even sue the company civilly if they are acting in bad faith.

Photo of page author Kristen Johnson

, LegalMatch Legal Writer

Last Modified: 09-15-2014 02:12 PM PDT

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