Purchasing life insurance is a smart way to help protect your loved ones should the unthinkable happen. It’s designed to help protect your beneficiaries financially if you suddenly pass away. But insurance companies also have to protect themselves from fraud, which is why there’s a life insurance contestability period.
If you’ve seen a contestability period outlined in your policy or are thinking about purchasing life insurance, keep reading to find out exactly what a life insurance contestability period is and how long it lasts, so that you can best ensure that your loved ones receive your death benefit payout.
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After you purchase life insurance, the insurance provider usually has two years during which to review your application (the exact period will be specified in your policy). This is known as the life insurance contestability period; if you pass away during those two years after purchasing the policy, your insurance provider has the right to contest or deny your death benefit to your beneficiary should anything be amiss.
This contestability period also restarts if you fail to pay your premiums at any point.
Passing away during the contestability period can mean it takes longer for your loved ones to receive the death benefit, because of the potential investigation from the insurance provider.
While not all deaths during the contestability period are investigated, they’re more likely to be investigated if the cause of death is health-related (versus a car accident or other accidental death).
The goal of the contestability period for life insurance providers is to ensure that your application wasn’t fraudulent in any way. Mistruths or omissions from your application can result in lower premiums and in some cases, you might not have been granted life insurance at all.
The contestability period is designed to prevent people from trying to take advantage of lower premiums designed for less risky policyholders. Even something as simple as not disclosing a past surgery or a prescription medication can result in your death benefit not being paid out to your beneficiary.
Accidental mistakes in your application can and do happen, so there’s an opportunity to correct information; you may end up having to pay higher premiums once the information is reviewed, but at least your death benefit won’t be rejected.
However, if you pass away within the first two years of purchasing your life insurance policy and have lied about something on your application, the insurance provider does have the right to reduce or reject your death benefit–even if the detail isn’t in any way related to your cause of death.
It’s also important to note that even once the contestability period passes, your insurance policy is still at risk and could be voided if you lied about something on your application.
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Being completely truthful on your life insurance application is your best bet to ensure that your loved ones are financially protected in the event of your death. Omitting information in order to save on premiums isn’t worth it if the death benefit becomes void.
The good news is that passing away during the contestability period for life insurance doesn’t necessarily mean that your beneficiaries won’t receive a payout. The insurance provider has the right to review everything, but if everything is in order then the death benefit will be paid out.
Even if mistakes are discovered, the payout may be reduced but not voided. However, if everything checks out during the contestability period, insurance providers have to pay out your death benefit to your beneficiaries.
Most insurance policies have a separate suicide clause, which is different from the contestability period for life insurance. The suicide clause means that insurance companies don’t have to pay the death benefit if a life insurance policy was purchased less than two years before the policyholder committed suicide. After two years, the death benefit will be paid out even if the cause of death is suicide.
Being truthful on your life insurance application may result in higher premiums, but it helps ensure your loved ones receive the death benefit payout in the event of your death. The goal isn’t for insurance providers to find a reason not to pay out your death benefit but to prevent fraud and keep premiums down for everyone.
A forthcoming application can protect your beneficiaries while giving you peace of mind that you’ve done everything you can to ensure your death benefit is paid out in full and in a timely manner.
Jessica Fox Jessica Fox has been a freelance writer for five years, with a specialty in health, wellness, and insurance. During this time, she’s written for some of the biggest B2B and B2C brands from around the world. Jessica is also the mother of two young daughters and loves coffee, writing, and working out.
