What Is the Contestability Clause in a Life Assurance Policy?

Two years… this is the usual length of what is called the contestability period. In a life assurance policy, this is the clause that prevents applicants to a life assurance who have misrepresented or withheld key information during the application from benefitting from the policy.

In essence, if it is found out within those two years that there was material information that was misrepresented or withheld, the insurance company has the right to contest the claim and deny it.

Material Information

The applicant for life assurance is expected to make full disclosure of material information. This includes information that is key in the insurance company’s assessment of your risk. Thus, your bout of the sniffles last week would not count, but a history of high blood pressure would. Saying “no” to the question, “Do you indulge in hazardous activities and sports?”, when you are an avid paraglider will also be counted as withholding material information.

The life assurance application will have a series of questions about your health, lifestyle, occupation and other key areas of your life and you are expected to answer these truthfully and completely. This will help the insurance company assess the kind of risk you present and charge you with the correct premium ratings accordingly.

The Consequences

The contestability clause may leave your loved ones without the insurance payout that should have proved helpful to them at the time of their need. If the insurance company contests the claim, they may deny the claim and refund the premiums paid.

Also, even if you don’t have a claim within the two-year period, if the insurance company finds out about any misrepresentation of facts, it reserves the right to cancel your policy. This means that you will be out of coverage.

However, the insurance company is also limited to the two years. After two years, even if evidence of material fraud, concealment or misrepresentation is found out, the insurance company cannot cancel the policy or deny any claims.

There’s Nothing to Fear

As long as you fully provide the information that is asked, there is nothing to fear about the contestability clause. It may be tempting to fudge a bit about some information, for fear that this will raise your premiums but the extra premium dollars you pay will be worth it versus the possibility that your beneficiaries’ claim will be denied.

Modified Policies

There are some guaranteed issue policies that have a different take on the waiting period. During the waiting period, the death benefits paid out will only be for accidental death. However, these are for guaranteed issue policies and not for traditional life assurance policies.

To protect your loved ones for less, fill the form on the right to get your life insurance quote.