All life insurance policies have a period of contestability, usually a span of two years, during which the insurer can investigate the application for fraud and misrepresentation and consequently deny a claim for death benefits. This provision is not always handled fairly. If your claim was denied during this period, please contact us. This contestability period begins once a policy is signed and becomes active.
Life insurance carriers frequent investigate claims filed during this two-year span. The insurance company is looking for any material misrepresentations in the policy application, as well to see if the underwriter missed something when drafting the policy. Generally three scenarios follow:
- If no adverse issues are found the insurer does not contest the policy or the claim, and the death benefit is issued to the named beneficiary.
- The insurance company may uncover information that, had they known this information when issuing the policy, they would have changed (raised) the premium on the policy. In these cases, the insurer could reduce the death benefit amount to account for costs the insured should have been paying.
- The insurer may discover reasons enough to deny the life insurance claim made by the beneficiary.
What Is Underwriting?
Not everyone pays the same amount of money for the same type of life insurance policy. Underwriting is the process the insurance company uses to determine the risk class that is appropriate for a potential insured. From this assessment, the insured party’s coverage and premium is determined.
If you apply for life insurance, the company will consider various factors such as your age, gender, health, medical history, public records (such as criminal history, driving records or bankruptcies), financial history, and risk factors associated with your employment and hobbies (are you a roofer or a pilot; do you enjoy mountain climbing or scuba diving?)
Knowing this background, the underwriter (insurer) assigns you an appropriate rating, or risk class. Basically, “risk classes” are based on the level of mortality of a similar group of people—your likelihood of dying given the information provided on your application.
What You Need to Know about the Period of Contestability
Insurance laws are meant to protect both life insurance companies and consumers of life insurance policies:
- Insurance providers cannot withhold benefits just because the insured made an error or accidentally left something out when completing their application.
- Insurers are allowed by law to reopen underwriting during the two-year period in case the applicant did hide or misrepresent facts.
- The law also obligates the life insurance company to do accurate due diligence during the underwriting phase, to eliminate denials due to irresponsible underwriting.
During the period of contestability, there is no limit on what the insurer can challenge. The insurance company may deny a claim for reasons that have no foundation in facts, even for honest mistakes.
For this reason, it is imperative to discuss your claim denial or rescission with a life insurance attorney immediately.
Can a Claim be Denied after the Period of Contestability?
As long as premiums are current, an insurer cannot rescind a life insurance policy or deny a claim to a beneficiary, except in proven cases of fraud. Generally, if a life insurer tries to delay or deny payment or launch an investigation when the insured dies after the two year contestability period, this would be violating the law.
If an insured replaces his or her existing policy with a new one, the clock on the contestability period is reset.
For straightforward, reliable review of your claim, call 800-562-9830 for a completely free case evaluation with a life insurance denial lawyer. We are here to help.