A Trans America life insurance claim for $200,000 was denied due to a material misstatement on the application, but we were able to resolve it, and get our client a check within 11 days. Read about reasons why life insurance won't pay out
If you have just received your new life insurance policy, you have anxiety wondering if anything can go wrong that would cause the policy to be canceled. Once the insurance company has offered a policy and the customer has accepted it, the company is committed to the terms specified in the policy, however there is an exception provided by a clause in the life insurance policy called the contestable clause.
What is Contestability Period?
During the life insurance contestability period the company can cancel the coverage and return the premium if it discovers that the information given by the policyholder to qualify for the insurance contains major misstatement during the application process. Usually this period of time is in the first one to two years.
What is a Material Misstatement?
Your life insurance policy will detail what type of misstatements can result in your policy being voided or a claim being denied. A material misstatement can consist of almost anything in the insurance company's eyes such as when you make an important omission by not telling he company about a major health problem which could have led the company to deny you insurance. The insurance company would have to discover the mistake during the contestable period specified in the policy, and if they fail to do so, you can assume your policy will be honored.
How to Avoid Contested Life Insurance?
You should advise them of any changes in your life. You might pay an increased premium rate, but you will feel better knowing that your beneficiary will receive the life insurance proceeds after your death. If your policy has been voided, or the beneficiary is filing a claim during the contestability period that is being denied, then you should contact an experienced insurance immediately. The life insurance company may be rejecting your benefits in bad faith and an attorney can determine if you have a legitimate case and work to get you the money you deserve.