When it comes to life insurance policies, there are a lot of specific terms and language that can be confusing to those who are new to buying such a policy. Unfortunately, failing to fully understand the terms of a life insurance policy can lead to life insurance claim denials and other problems down the road. One of the more common life insurance terms that people struggle with understanding is that of the contestability period or contestability clause.
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What is a Contestability Clause?
Almost all life insurance companies out there will insist on including what's known as a contestabilty clause in any policy taken out through them. This is done to protect the insurance company from losses that result from fraudulent claims. Specifically, a contestability period typically lasts anywhere from one to two years; during this period, if a death benefits claim is made by a beneficiary, the claim will automatically be investigated deeply before it is approved.
Furthermore, if it is determined that the original applicant of the policy made any misstatements in the application or elsewhere, whether intentional or accidental, the claim can be denied.
Potential Reasons for Denial
As mentioned above, misstatements on an original application can and often will automatically result in a denial of a life insurance claim. This could be something as simple as the applicant answering that he or she did not plan on traveling outside the country in the 12 months following taking out the policy. Unfortunately, if plans honestly changed and the policyholder failed to update that information with his or her life insurance company, this could still result in a denial.
Another example of a possible reason for denial based on the contestability period is that of the applicant stating that he or she is a non-smoker, even when he or she likes to enjoy a cigarette or two each day.
The Importance of Updating Policy Information
It should go without saying that lying on a life insurance application could lead to a beneficiary having a hard time getting a claim approved down the road. What so many people fail to realize, however, is that even an accidental misrepresentation of facts can result in a denial during the contestability period. This is why it is so important for policyholders to update their information any time a change is made. Yes, the change could result in slightly higher life insurance premiums, but at least you will be able to enjoy the peace of mind in knowing that your beneficiary's claim won't be outright denied down the road.
Facing a Delay or Denial on Your Claim
In the event that you do end up facing a denial or delay based on a life insurance contestability period, the recommended course of action is to retain an experienced life insurance attorney, one with at least 15 years of experience handling life insurance denials. By doing so, you can receive the legal advice you need on which actions to take next, such as retaining us to file a 100-200 appeals brief.
By having a better understanding of life insurance contestability period and how they can affect a beneficiary's claim, you can make wise decisions regarding your own coverage, and hopefully protect your beneficiaries from problems in collecting the death benefits they need.