Contestability Period
The contestability period is typically the first two years of a life insurance policy during which the insurer can investigate and deny claims based on material misrepresentation or fraud in the application.
Exam Tip
Contestability = first 2 years, insurer can investigate. After 2 years = incontestable (except fraud). Suicide clause is separate!
What is the Contestability Period?
The contestability period is a timeframe (typically 2 years from policy issue) during which an insurance company can investigate claims and potentially deny or reduce benefits if the policyholder made material misrepresentations on the application.
Key Features
| Feature | Description |
|---|---|
| Duration | Usually 2 years from policy issue |
| Purpose | Protect insurer from fraud |
| Trigger | Death claim filed during period |
| Investigation | Company can review application accuracy |
What Insurers Can Contest
| Issue | Example |
|---|---|
| Medical History | Undisclosed heart condition |
| Lifestyle | Lied about smoking status |
| Occupation | Concealed dangerous job |
| Family History | Omitted hereditary diseases |
| Other Insurance | Undisclosed existing policies |
Contestability Timeline
| Timeframe | Insurer's Rights |
|---|---|
| Year 1-2 | Can contest for any material misrepresentation |
| After Year 2 | Generally cannot contest (with exceptions) |
| Exception | Fraud may be contested indefinitely |
Material Misrepresentation
To void a policy, the misrepresentation must be:
| Requirement | Meaning |
|---|---|
| Material | Would have affected underwriting decision |
| Made by Applicant | Policyholder or authorized representative |
| Related to Risk | Connected to insurance risk |
| Relied Upon | Insurer relied on the information |
Outcomes if Contested
| Finding | Outcome |
|---|---|
| Fraud Proven | Policy voided, premiums returned |
| Misrepresentation | Benefit may be adjusted or denied |
| No Issues Found | Claim paid normally |
| Minor Inaccuracy | Usually paid, possibly adjusted |
Reinstatement and Contestability
If a policy lapses and is reinstated:
- New 2-year contestability period may begin
- Applies to statements on reinstatement application
- Original contestability may still apply to original application
Suicide Clause vs. Contestability
| Clause | Timeframe | Coverage |
|---|---|---|
| Contestability | 2 years | Misrepresentation issues |
| Suicide | Usually 2 years | Death by suicide |
Study This Term In
Related Terms
Incontestability Clause
InsuranceThe incontestability clause is a life insurance policy provision stating that after a specified period (usually 2 years), the insurer cannot contest or void the policy based on material misrepresentation in the application, except for fraud.
Underwriting
InsuranceUnderwriting is the process by which an insurance company evaluates risk and determines whether to accept an application for coverage and at what premium rate.