Understanding The 2 Year Contestability Period

You may have heard before that if you insure yourself for life insurance and die within a two-year period of the policy being open, that the insurance company can decline to pay your beneficiaries.

This is completely true, and is known as the Two Year Contestability Period.

This is a form of “insurance” for the insurance companies, so they can make sure you didn’t make any misrepresentations on your initial application.

The only way they will decline making the payout within the first 2 years, is if they deem the misrepresentation to be “material”. What this means is if you withheld any information from the life insurance company at the time of the application (and it would have affected the outcome of the health classification or even offering coverage at all), they can deny your claim.

The good thing for most people is, this is rarely an issue, because most underwriters are very thorough before approving someone for a policy. It’s important that you understand your life insurance policy and the coverage that you are getting. We know that it can be confusing to find the perfect insurance policy, but we are here to help clear up any confusion.

Examples of Material Misrepresentation in Practice

Let’s say while going through the underwriting process, you weren’t completely honest about certain things regarding your health. Common things that people lie about include being a smoker, or partaking in risky activities like SCUBA diving. If you managed to slip through the cracks and get approved, and then die within two years of your application, this would be considered fraud on your part, and the insurance company would not be required to pay you.

This usually requires an investigation after your death, but would usually only happen if your death gave them reason to believe you had lied or didn’t disclose something about your medical history.

Another example is if you had an operation or some sort of serious health problem in a foreign country, which wasn’t well reported. If it was then found out after your death, within two years of your application, the insurance company would not be liable to make any payments for your death benefit to your beneficiary.

Suicide is another example. If you have committed suicide within two years of your policy beginning, your beneficiaries will not receive any death benefits. The typical route of action, is for them to refund any premiums you’ve paid so far.

After two years though, your policy is considered to be incontestable.

No matter the circumstances, even if you’ve committed suicide, if it has been over two years since you took out the policy, the insurance carrier will be liable to pay your death benefit.

While we definitely aren’t recommending that anyone lie and cross their fingers that they make it another two years, it is always good to understand the timeframes for the contestability period.

If you are looking specifically for high risk life insurance rates; we can help. Call us today!

New Rules Regarding the Two Year Contestability Period

Some insurance carriers have a new policy, where if you let your life insurance policy lapse and then reinstate it, or make amendments to your policy, the two year contestability period could start over again from that date.

If you have let your life insurance policy lapse, or have planned on making changes to your policy, it would be wise of you to consult with your life insurance company to see what their policy is on this.

If you’re telling the truth on your life insurance application you don’t have to worry about the two year contestability period.

If you’re open and honest on your life insurance application then the worst case scenario if, god forbid, something happens to you within the first two years – is it might just take a few extra weeks to receive your death benefit while they investigate the cause of death and see if you misrepresented anything.  If it’s passed the 2 year contestability period, we see payouts within a few days to 1 week after submitting claim forms.

Getting Affordable Life Insurance

The two year contestability period is one of the scariest aspects that applicants run into when they are applying for life insurance. It has caused a lot of people to decline coverage or look for another plan. While it will never impact 99.9% of people, it can be a scary thought.

One of the other most common reasons that people turn away life insurance coverage is because of costs. In most cases, insurance protection is cheaper than you might assume.

If you’re searching to get the cheapest possible rates, you’ll need to do some work beforehand.

To begin, you should finally stop smoking. If you’ve been trying to kick some of those awful habits, this is the perfect time. Smokers have rate categories which are much higher.

When you’re looking for a plan (smoker or not) you’ll need to do some shopping around. Each plan and carrier is different and all of them will have various premiums.
It’s like shopping for a car. There are thousands of makes, models, and prices. We can be your personal shoppers.

Do you have any other questions about the contestability period? We have experienced life insurance agents who are standing by and are ready to help.

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About Jeff Root

is the owner of rootfin.com. He's an independent life insurance agent who has helped 1,000's of consumers purchase life insurance online and over the phone.

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2 Comments

Gabriel

What if your 10 year term life insurance expires and you start a new 10 year policy, does a new 2 YEAR CONTESTABILITY PERIOD come into effect?

September 1, 2016 at 6:59 pm
    Jeff Root

    Yes. A new 2 year contestability period will come into effect.

    October 16, 2016 at 5:17 pm
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