Incontestability ClauseCredit Repair Definition
A clause in insurance policies preventing the insurer from voiding coverage based on misstatements after a certain period.
Definition
An incontestability clause is a provision commonly found in life insurance policies (and sometimes disability or health insurance) that prevents the insurance company from canceling the policy or denying a claim based on material misstatements made by the insured on their application after the policy has been in force for a specific period, typically two years (though sometimes one year). This means that after the contestability period expires, the insurer cannot generally dispute the validity of the policy, even if they later discover inaccuracies or concealments in the original application (except in rare cases like deliberate fraud intended to deceive, or impersonation). This clause provides security to the policyholder and beneficiaries, ensuring claims won't be denied years later due to unintentional errors made during the application process.
Frequently Asked Questions
What is the typical length of the contestability period?
The most common contestability period for life insurance policies in the United States is two years from the policy issue date. Some states may mandate slightly different periods.
Does the incontestability clause protect against all types of fraud?
Generally, it protects against denial based on misstatements or concealments after the period expires. However, most jurisdictions allow insurers to contest a policy even after the period for certain egregious issues, such as lack of insurable interest, impersonation (someone else taking the medical exam), or sometimes, proven intentional fraud designed to deceive the insurer from the outset.
What happens if the insured dies during the contestability period?
If the insured dies within the contestability period (typically the first two years), the insurance company has the right to investigate the application for any material misrepresentations. If significant misstatements are found (e.g., undisclosed medical conditions), the insurer may deny the claim, adjust the death benefit, or refund the premiums paid instead of paying the full face amount.
Category
Need Credit Help?
Discover tools and resources to help improve your credit score and financial health.