Key Facts Every Florida Life Insurance Beneficiary Should Know about the Contestability Period

People often purchase life insurance policies to provide for surviving family members.  If the insured dies prematurely, the death benefit under a life insurance policy can provide a critical financial resource that allows loved ones to maintain their standard of living.  However, there are certain policy exclusions, restrictions and conditions that can deprive a family of this form of financial security. 

The contestability period under a life insurance policy is a short period during which insurance companies can investigate and deny claims after the policy has gone into effect.  In Florida and most states, the life insurance contestability period is two years.  If a policyholder dies during this two year window, the carrier can investigate to confirm that the insured provided accurate information when applying for the life insurance policy.  If the insurance company discovers that an insured provided false information when applying for coverage, the insurance company might deny the death benefit even if the misrepresentation was not related to the cause of death.

My Miami-based law firm represents life insurance beneficiaries who are wrongfully denied death benefits.  Before attending law school and becoming a life insurance claims attorney, I workers as an insurance adjuster.  Based on my experience, I have provided some key facts that beneficiaries should know about contestability periods.

Innocent mistakes will not necessarily result in denial of the death benefit.

While it is important that you always try to provide accurate information when submitting an application for life insurance, an unintentional error will not necessarily mean that the life insurance carrier will not pay the death benefit, depending on the language of insurance application.  People sometimes make relatively minor errors where there is no intent to mislead or deceive the insurance company.  If you are answering a question about the date you quit smoking, for example, you might honestly be off by a few years.  In this situation, the insurance company MIGHT simply evaluate what your premium would have been with the correct information and adjust the amount of the death benefit by the difference between what you paid and what you should have paid.  When the insurance company is making this determination, it will consider the amount of the claim and the nature of the misrepresentation.

The rationale behind the contestability period is to control premiums.

When insurance companies adjust claims, the carriers consider the amount and nature of the risk.  This risk assessment is critical in determining the policy premium.  When information is misrepresented, the premium may be set too low given the risk.  Without the contestability period, the insurance company would compensate for premiums that are too low in these cases by raising premiums for others in the risk pool.

Certain situations can result in the contestability period restarting.

When a policy lapses because the premium is not paid, the reinstatement of the policy will generally restart the two year contestability period.  Similarly, the period will restart if you transfer the cash value of a permanent life insurance policy into a new policy.

Lies on life insurance applications can put the financial security of your surviving family members at-risk.

Applicants for life insurance should never lie or omit information to reduce their premium because they are essentially gambling that they will survive the contestability period.  If an insured passes away during this window, inaccurate information in the application can lead to a lot of stress for loved ones.  A best case scenario is that inaccurate information will delay a death benefit, but misrepresentations could result in a denial.

Even if you survive the contestability period, insurance fraud can still be a problem.

While it might occur to someone that the probability of passing away during the contestability period is really low, this still does not make it a good idea to misrepresent information.  The insurance company might still refuse to pay the death benefit if it determines the application was fraudulent.

A death during the contestability period might result in a delay in the beneficiaries receiving the death benefit.

The insurance company will generally request and review medical records for the insured if he or she dies during the contestability period.  This investigation process will result in some delay in the death benefit being paid.

A death during the contestability period does not relieve the insurer of its contractual obligations under the policy.

While the insurance carrier has a right to investigate a claim during the contestability period to verify the underwriting decision was based on accurate information, the carrier is still bound to pay the death benefit if the information provided was accurate.

If you are the beneficiary of a life insurance policy, I invite you to contact my law firm with questions about death benefits.  I am an experienced Miami life insurance claims attorney who handles disputed claims in Miami and throughout Florida.  The Law Firm of J.P. Gonzalez-Sirgo, P.A. offers free consultations and case evaluations.  No Recovery, No Lawyer Fees.  Call 305-461-1095 or Toll Free 1-866-71-CLAIM.

Just was curious how long does a life insurance company have to investigate a claim that's being contested?
by Denise June 20, 2017 at 10:41 AM
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