Life Insurance Contestability Period

life insurance contestability period 2021

A complete guide to life insurance contestability period

Life insurance brings with it a plethora of reassuring thoughts. It allows many people to sleep easily at night since they don’t have to worry about what will happen to their family or loved ones if they die unexpectedly. But what if you just got your policy and you don’t survive past the life insurance contestability period?

The Period of Contestability

The contestability term of your life insurance contract is when the life insurance company can contest the payment of the death benefit. Technically, they attempt to nullify the contract by demonstrating a substantial misrepresentation that persuaded them to engage in a contract they would not have gone into otherwise.

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Most insurance agents understand that the contestability period is a two-year term following the policy’s inception. And this wide term does a decent job of expressing the overall point. However, there is one nuance that is beneficial, and we will investigate it. But initially, some specific vernacular must be defined.


Statements made by an application (and the contract’s writing agent) are deemed representations. The legal implications of this are somewhat extensive, and we will merely scrape the surface for our purposes. However, understanding that this classification has a lot of looser importance on absolute fact is a quick method to grasp the significance.

In other words, because these assertions are deemed representations rather than guarantees, you, the applicant, have no legal commitment to their integrity (in the sense that you would be forced to repay the insurer for erroneous information). It also implies that you are not stating that something is and will always be a specific way (i.e., you do not presently use tobacco products, but you make no promises that you never will).

Equity as a legal notion is largely unknown in the United States. Attorneys are familiar with the word, but few laypeople are. Equity cases are lawsuits filed against a party to enforce a contract. For example, if an insurance company refuses to pay a claim, you would almost certainly file equity litigation against the firm to force it to pay the death benefit (i.e. enforce the contract agreement). Legal remedies, on the other hand, seek to recoup damages suffered by a party. Based on our previous example, you may sue the insurance for damages incurred while attempting to execute the contract.


The process of voiding a contract is known as rescinding. Within the context of our insurance system, an insurance company may attempt to cancel a contract after discovering a significant misrepresentation that would have barred them from entering into the contract in the first place.

The Contestability Clause’s Evolution

A contestability clause is included in all normally underwritten life insurance policies. This is usually located near the beginning of the contract under basic information sections and discusses the length and specifics of the contestability period. Most states have two years (excluding Missouri, which has one year). However, there is some subtlety to the time that has developed over time.

The clause used to say something like, “the policy will be contestable for two years after the policy date.” And while this appears to be straightforward, it contains a hidden loophole discovered by an adept beneficiary or attorney. The insured died during the first two years, but the beneficiary did not file a claim until the two-year period expired.

This stroke of genius paid off, as the courts found in favour of the beneficiary and ordered the insurer to pay the claim, even though the contract expressly stated that the insurer could no longer challenge the claim (for those interested in the minutia, this is commonly referenced as the Monahan Decision).

Most contestability clauses now include language stating that the time is for two years following the contract’s inception during the insured’s life. That is, the insured’s death stops the contestability period clock.

So, what happens if a person dies during the contestability period?

In the event of death during the contestability period, the insurer will probably investigate the facts to ensure no grounds for the rescinded contract. But, again, of course, this is an issue of sound business practises. However, a few critical aspects will have a significant impact on the original contract’s future options. And, because insurance companies normally have an advantage in terms of expertise, we felt we’d level the playing field by providing some background information to the broader public.

Suicide: What Kind of Death Is Important?

Most agents are unaware of the distinction between ruling a death a suicide and appealing the death benefit. Sure, there are two distinct provisions in the contract dealing with suicide and contestability, but most agents overlook the distinctions because the end effect is the same.

To provide some context, the suicide clause typically runs concurrently with the contestability period. For example, suppose an insured commits suicide during the suicide period. In that case, all premiums paid under the contract are reimbursed, just as if a death benefit is successfully contested and a contract is withdrawn. However, if death occurs due to suicide after the suicide period, the contract’s stated death benefit must be paid.

However, there is a significant difference between the return of premiums for a cancelled contract and premiums for suicide within the suicide period. Contesting and rescinding a contract renders the contract void and establishes the situation as if the contract was never entered into; as a result, the premiums must be repaid. Therefore, refunding premiums under the suicide provision is considered payment of the suicide provision’s death benefit.

Subtle Difference, Massive Repercussions

This seemingly tiny difference greatly influences the position an insurance company may find itself in if it finds that the insured committed suicide and does not fight the death benefit. According to prevalent legal opinion, a fast decision to judge death a suicide and pay the death benefit (refund of premiums) is an admission that there is nothing to fight.

This means that if the beneficiary can show that the insurance company was wrong and the death was not caused by suicide, the insurer is obligated to pay the full death benefit.

And how can the beneficiary prove that the death was not the result of suicide? One of the simplest ways to do this is to ask a medical examiner to revise their original conclusion of the cause of death, which is more common than you may think.

Suicide is but one example.

If an insurer attempts to contest a death benefit based on one specific theory and is incorrect about it, the beneficiary can prove it. Still, there were grounds to rescind the policy, and the insurer missed the truth; going back and starting over with the true reason to contest the death benefit is generally not permitted. As a result, insurers will typically take their time gathering as much data as possible and being as wide as possible while opposing a death benefit and refusing a claim.

The Period of Contestability for life insurance

What You Should Know

During the contestability phase, many things happen during a claims investigation for a life insurer. It is critical to understand why people do these things and what may come from them. And understanding why they happen and what may happen as a result is extremely beneficial.

Refer to the Original Application

If the insurer attempts to fight a death benefit, ensure that the grounds on which they do so are not mentioned in the original application. Almost all life insurance contracts contain the original application in the policy contract for the insurer’s and applicant’s safety. This assists in determining what the insurer and applicant knew when they entered into the contract.

For example, suppose an applicant admitted to having a TIA (transient ischemic attack, also known as a mini-stroke) in the application, was granted life insurance, then died of a CVA (cerebrovascular accident, also known as a stroke) during the contestability period. The insurance decided to oppose the death benefit, claiming that it was unaware of the stroke history. The disclosure is visible inside the application, and this information will certainly be used to reject the insurance company’s request to withdraw the contract.

Examine the Underwriting History as well as any Disclosures.

This one is a little more difficult, but it’s still well worth the effort. Returning to our TIA example, we can see that the carrier that issued the life insurance had checked the applicant’s attending physician statement (APS, or medical charts as recorded by their doctors seen). Following the TIA, the patient had a significantly high ABCD2 score, according to the APS.

The fact that the APS was required and the existence of this material in the APS could be used to reject the insurer’s right to cancel the contract. The technical detail here is that insurers normally cannot utilise the information they were aware of but discount, or information they should have reasonably known but did not account for whatever reason, to argue a death benefit subsequently.

This is also true and crucial in the circumstances involving a contestability period resulting from policy reinstatement. When a policy is reinstated (this occurs when a policy lapses due to non-payment and is restarted at the original issue age, but medical underwriting is required to show eligibility for coverage), a fresh contestability period begins on the reinstatement date. Therefore, all information supplied in the original application and the reinstatement paperwork could be considered information is known to the insurer.

How can one obtain this data?

This can be a difficult question at times, but a skilled agent can be very helpful in this regard. Records on underwriting criteria can be difficult to come by, but some of us preserve them for various reasons, including this and other factors.

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