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ERISA • Employment Law

What is the Life Insurance Contestability Period?

23 Feb 2021

Once you have purchased a new life insurance policy, your beneficiaries are not guaranteed to receive payment on any claim for the first two years of the policy. This is known as the contestability period, and the insurance company uses it to protect itself. It may refuse to pay claims if it finds that there was fraud or the applicant lied on their application. This is when you need to contact a Philadelphia life insurance attorney.

Expect the Insurance Company to Review a Claim Made During this Period

Just because the life insurer has the right to review all claims made within the first two years does not mean that it will deny every claim. The insurance company is still obligated to pay out on claims if someone dies during the contestability period unless the investigation uncovers a reason for the carrier to rescind coverage. However, it does mean that it may take more time to investigate, and it could delay the payment of your claim.

You can expect that insurance companies will always investigate further if the policyholder dies in the first two years. The insurance company will end up paying in a majority of cases. It might ask some more questions depending on the cause of death. You can expect even more inquiry if the cause of death is any of the following:

  • Certain types of cancer;
  • Drug overdoses;
  • Single-vehicle accidents; or
  • Gunshot wounds

The insurance company does not, however, have the absolute right to deny every claim. Instead, it must find evidence of material misrepresentation on the policy application. The insurance company may also contest the payment of a claim if it discovers that the payment of policy premiums had lapsed.

What the Insurance Company May Try to Do During Contestability

If the insurance company does find evidence of inaccuracies on the application, it has three options:

  • Increase the premiums that one should have paid and use the money to reduce the death benefit
  • Deny the claim for the death benefit in its entirety
  • Reduce the death benefit

Insurance may still try to deny or reduce the claim even if the cause of death had nothing to do with what it claims was a misrepresentation.

The insurance company does not have the final say if it chooses to deny benefits. The first thing that you can do is to go through the insurance company’s appeals process. This is not always easy to do, especially at a time when you and your family are grieving. Nevertheless, you could try to persuade the life insurance company that it made a mistake. The more likely way to contest the denial of benefits is to file a lawsuit against the insurance company.

Philadelphia Life Insurance Attorney

If you have filed a claim that was denied by the life insurance company, you have legal rights to appeal. Contact the Philadelphia life insurance attorneys at the Garner Firm to schedule your free initial consultation and learn if you can challenge the decision that denied you the money that you needed.

Experienced Counsel

Mr. Garner is an ERISA employee benefits and employment attorney with over a decade of experience. The laws governing employee benefits, the employment relationship, and the workplace are complex.

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