Many people believe that once a life insurance policy has been in force for two years, the insurer can no longer challenge the claim. This belief comes from the incontestability clause found in many individual life insurance policies. Under that clause, insurers generally lose the ability to rescind the policy for misrepresentations after the two year period expires.
However, this protection often does not work the same way for employer provided group life insurance. Many families are surprised to learn that the two year rule they expected may not apply to coverage provided through a workplace benefit plan.
Attorney Christian Lassen represents beneficiaries nationwide in disputes involving denied life insurance claims.
What the Incontestability Clause Normally Does
In many individual life insurance policies, the incontestability clause prevents insurers from challenging the validity of the policy after a specified period, typically two years.
During the first two years after the policy is issued, insurers may investigate whether the insured made misrepresentations in the application. If the insurer believes important medical information was omitted or misrepresented, it may attempt to rescind the policy.
Once the contestability period ends, the insurer usually cannot void the policy for application misstatements except in very limited circumstances such as fraud.
This rule gives policyholders a sense of long term certainty about their coverage.
Why Group Life Insurance Works Differently
Employer sponsored life insurance is usually issued as a group policy rather than an individual contract. The employer holds the master policy with the insurance company, and employees receive coverage through that policy.
Because of this structure, the timing rules that apply to individual policies may not function the same way for each employee.
Several factors make group life insurance different:
The employer is the policyholder
Employees join the plan at different times
Coverage amounts may change during employment
Eligibility depends on employment status and benefit elections
These differences can affect how contestability provisions operate.
The Moving Start Date Problem
In group life insurance plans, coverage often begins when the employee becomes eligible or elects coverage. Employees may also increase their coverage later through open enrollment or salary changes.
Each of these events can effectively create a new start date for part of the coverage.
For example:
An employee receives basic life insurance automatically when hired
Years later the employee elects supplemental coverage
The supplemental coverage may require medical questions or evidence of insurability
In these situations, the insurer may treat the additional coverage as a new issuance with its own contestability period.
Evidence of Insurability and Supplemental Coverage
Many employer plans allow employees to purchase supplemental life insurance above the guaranteed issue amount. To obtain this extra coverage, the employee may be required to submit health information or medical questionnaires.
If the insurer later reviews those answers after the employee’s death, it may argue that the coverage should never have been approved.
Even if the employee worked for the employer for many years, the insurer may focus on the date the additional coverage was approved rather than the original employment date.
ERISA and Employer Sponsored Life Insurance
Most workplace life insurance plans are governed by ERISA. Under ERISA, disputes about coverage are often decided by reviewing the administrative record created during the claim and appeal process.
When insurers investigate claims under these plans, they may examine:
Enrollment records
Evidence of insurability forms
Medical records
Employment eligibility information
Coverage elections during open enrollment
If the insurer believes incorrect information was provided during enrollment, it may attempt to deny the claim even if the employee had been covered under the plan for many years.
Why Beneficiaries Are Often Surprised
Many employees assume that their workplace life insurance operates the same way as an individual policy purchased directly from an insurance company.
However, the group policy structure means that coverage can change over time as employment status, salary, and benefit elections change.
Because of these changes, the expected two year protection may not apply in the way beneficiaries anticipate.
Legal Help With Group Life Insurance Denials
Life insurance disputes involving employer sponsored plans often involve complicated questions about eligibility, enrollment, and the timing of coverage changes. Beneficiaries are sometimes surprised to learn that the incontestability protections they expected may not apply to certain portions of group life coverage.
The Lassen Law Firm focuses exclusively on life insurance disputes nationwide. Attorney Christian Lassen has more than 25 years of experience representing beneficiaries in denied life insurance claims.
If a group life insurance claim has been denied based on application statements or enrollment issues, legal review may help determine how the policy provisions and ERISA rules apply.