What Should A Life Insurance Beneficiary Know About the Contestability Period?

J.P. Gonzalez-Sirgo
Founder of J.P. Gonzalez-Sirgo, P.A.

Folks 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, that can deprive a family of this form of financial security. 

The contestability period under a life insurance policy is a 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 from the date the the life insurance policy goes into effect.  If a policyholder dies during this two year window, the insurance company will 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 material false or incorrect information when applying for coverage, the insurance company will deny the death benefit even if the misrepresentation was not related to the cause of death.

Some key facts that beneficiaries should know about contestability periods:

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

While it is important that you always provide accurate information when submitting an application for life insurance, an unintentional error will not necessarily mean that the life insurance company will not be required to pay the death benefit, depending on the language of the insurance application.  Some applications for insurance require that the applicant's answers be to the "best knowledge and belief" of the applicant.  This is a lower standard than Florida has codified in statute F.S. 627.409.  Under this standard, innocent misrepresentations may not void the insurance policy.  The language on the application for insurance is be key. 

The rationale behind the contestability period is to control premiums.

When insurance companies underwrite a life insurance policy, the carrier considers 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.  

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 two year 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 that the application for insurance was fraudulent.

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

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

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

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

What can an experienced life insurance claims lawyer do for a beneficiary caught up in a post-death investigation?

An experienced life insurance claims lawyer can be pro-active in clarifying to the insurance company what the applicable controlling law is and by working with medical providers, experts, witnesses, and/or finanacial consultants to explain away any alleged misrepresenations.  The sooner that an experienced life insurance claims lawyer gets involved on behalf of a beneficiary the better the chances of collecting on the policy. 

You can reach Miami Life Insurance Claims Lawyer J.P. Gonzalez-Sirgo by dialing his direct number at (786) 272-5841, calling the main office at (305) 461-1095, or Toll Free at 1 (866) 71-CLAIM or email Attorney Gonzalez-Sirgo directly at [email protected].

 

1 Comments
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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