Incontestability Clause: A Safety Net Against Claims Rejection

Hello! Did you know there’s an important provision of insurance known as the incontestability clause, which many people don’t know about?

Understanding this clause is important for your life insurance experience, it’s like a life jacket for your policy.

So, let’s explore it today – what it is, who it protects, and its implications.

History: When? and Why?

The incontestability clause in insurance has been around for a while; it was first offered in 1848 by London Indisputable Life, a British insurance underwriter, and in 1864 by the Manhattan Life Insurance Company in the United States.

Thereafter, going through a phase of evolution to prevent the bad faith practice of denying claims based on minor errors in applications, finally in 1946, the National Association of Insurance Commissioners (NAIC) drafted a model incontestability clause statute based on the 1907 New York Standard Policy language, and at least 47 states adopted these statutes requiring the inclusion of an incontestability clause in every policy of life insurance sold in that state.

Source: Fosaaen, Eric K. (1990), “AIDS and the Incontestability Clause,” North Dakota Law Review: Vol. 66: No. 2, Article 3, Page 268.

Since then, this clause has been universally adopted and has stood the test of time, which reinforces its significance in the insurance industry.

Define the Incontestability Clause

It’s a contractual provision in your life insurance policy that limits the liability of insurance providers for a contestable period of time to dispute or reject claims, after which they cannot challenge your policy’s validity, even if they discover errors or misrepresentations in your application.

Why is it called the “Incontestability Clause”?

After a certain period, as per your policy, it becomes incontestable in the sense that the insurance company cannot dispute it based on the information you provided in your application.

The terms “indisputability,” “incontestable clause,” or “incontestability clause” are all the same and can be used interchangeably.

Contestability Period vs. Incontestability Clause

Both of them are intrinsically linked to life insurance policies, but there’s a clear distinction between them, and they work differently.

The Contestability Period

  • In the U.S., your policy normally has a two-year waiting period from the effective date. The insurance company can investigate, challenge a policy, and reject claims if they find any mistakes or missing information in your application during this period, i.e., your insurance policy is ‘contestable‘ during this time, and a successful contest could result in a lower payout or denial of the death benefit.

The Incontestability Clause

  • After the contestability period ends, the insurance company cannot challenge the legitimacy of your policy.

In summary, the Contestability Period is a time when the insurance company carefully reviews claims and applications, and the incontestability clause protects policyholders from having their claims denied after a period of scrutiny.

The National Association of Insurance Commissioners sets the standard, but it may still vary based on state laws and insurance company policies. In most U.S. states, it’s two years.

How an Incontestability Clause Works

This clause protects the policyholder after the contestability period (usually two to three years). If they had no issues within the specified period after buying a life insurance policy. Their policy is now considered ‘incontestable.’

What if the policyholder dies during the contestability period?

The insurance company can investigate the application for inaccuracies during this time. If a medical condition is not disclosed, the claim from beneficiaries may be denied, but it needs to be proven that the undisclosed or misrepresented information is important and would have influenced their initial underwriting decision.

  • Example: A policyholder dies after the contestability period, and the insurer finds an error in their application: the policyholder claimed to be healthy but was actually diabetic, and the insurer discovered this later. So, now the insurer cannot deny the claim because of this clause, despite the discovery of the discrepancy.

The Purpose of the Incontestability Clause

It aims to balance the insurer’s protection against fraudulent claims with the policyholder’s right to coverage.

This clause allows the insurance company to contest any incorrect or missing information within a certain time frame. It encourages them to act in good faith and carefully review applications, resolving any uncertainties during the underwriting process, and prevents them from denying claims due to misrepresentations, for which they could have verified the information during underwriting.

And after the contestability period ends, this clause reduces insurers’ administrative burden by saving them from having to investigate the insured’s statements for truth and accuracy years or decades after issuing the policy.

It gives policyholders and beneficiaries peace of mind by providing certainty.

How Does the Incontestability Clause Affect Life Insurance?

It brings comfort to policyholders, knowing that their beneficiaries’ claims won’t be denied. Life insurance can be complex, but having certainty is invaluable.

Insurance companies need to be extra careful when underwriting policies because they have a limited time to contest any inaccuracies in the application. So, they must thoroughly review the medical and personal information that applicants have provided.

However, the incontestability clause is affected by policy lapse and premium payments, i.e., if one stops paying premiums, their policy could lapse, and the contestability period will start over once they reinstate the policy.

Policyholders must remember this critical factor. If one’s policy has lapsed, it means they have no coverage, and if the policyholder dies during this time, the beneficiaries will not receive a death benefit.

It’s the policyholder’s responsibility to make regular premium payments to keep their policy active.

Who is Protected Under the Incontestability Clause?

It may seem like it only benefits insurance companies, but it’s not; it’s an important provision that protects policyholders and their beneficiaries too.


  • It protects policyholders from having their coverage cancelled due to innocent mistakes in their application, as long as these mistakes are not found during the contestability period, and this policy is secure after a specified period, as long as they keep paying premiums on time.


  • This clause ensures that beneficiaries’ claims won’t be denied after the contestability period, giving them peace of mind. The death benefits are guaranteed to beneficiaries, even if there were innocent mistakes in their application.

Misstating Age or Gender and the Incontestability Clause

Accurate personal information, such as age and gender, is crucial when applying for a life insurance policy. Insurance companies consider these factors when setting policy premiums.

What if one writes the wrong age or gender?

Providing incorrect information about one’s age or gender on their life insurance application is considered a misrepresentation. It’s important to differentiate between accidental errors and deliberate fraud.

In an innocent misstatement, one made a mistake and didn’t mean to give the wrong information. They might have made a mistake or misunderstood the information while filling out the application. Insurance companies usually don’t cancel policies in these cases. They can change the premiums or match the death benefit pro-rata according to age or gender provided in the application, and the incontestability clause is relevant here.

If the insurer doesn’t catch the mistake after the contestability period, the policy becomes incontestable, even if one had provided incorrect age or gender information. The insurance company cannot deny a claim or cancel the policy due to a misstatement.

However, there’s a twist. If one has lied about their age or gender to get lower premiums, it will have consequences. This is fraud, and it can be challenged or cancelled even after the contestability period.

Exceptions to the Incontestability Clause

Non-payments: If one doesn’t pay premiums, this clause won’t apply. Life insurance policies require regular premium payments to stay active. This clause will not protect against policy termination due to nonpayment.

Upgrades: This clause may not apply to some policy changes or upgrades. If one buys more coverage or a policy rider after the first policy, the insurer may have a new contestability period for it.

Unrelated reasons: In some states, insurers can deny a claim for reasons unrelated to the cause of death, even after the contestability period. If a policyholder lied about smoking and died in a car accident, the insurer could deny the claim, depending on state laws.

Fraudulent misrepresentations: If the insurer finds out that the policyholder committed fraud while applying for the policy, they can cancel the policy even if it has been active for decades.

  • A common example of fraud in the medical insurance industry is someone else taking the policyholder’s tests or hiding a serious illness.

Exceptions may vary based on your policy and state insurance laws. Make sure to carefully review your policy documents and talk to an experienced insurance advisor to fully understand any exceptions and how they could affect your coverage.

What About Supplemental Benefits?

You may have heard of ‘supplemental benefits’ when talking about or researching life insurance. You can add extra benefits to your life insurance policy through policy riders. They include accidental death, waiver of premium, child rider, and chronic illness benefits.

How does this matter?

If you make a mistake on your application for the supplemental benefit and the insurance company finds out during the contestability period, they could deny your claim or cancel the benefit, even if the base policy is not contestable.

What to Do if Your Policy is Challenged

Imagine that you’ve paid your life insurance premiums for years, feeling secure.

Now, if your insurance policy is challenged by the insurer or a claim is denied unexpectedly, It’s definitely a stressful situation that no one would like to face.

There are steps you can take, so don’t lose hope.

  • Firstly, stay calm, even if you’re surprised by the challenge. Rules and procedures are there to protect policyholders.
  • Thereafter, try to understand why your policy or claim is being challenged.

Insurance companies must clearly explain why they deny a claim or challenge a policy. Please make sure to obtain written documentation of this information.

Now gather your evidence. You can provide documents like medical records, payment receipts, or other relevant files to strengthen your case.

Consider seeking professional help if the dispute is complex or if you feel the challenge is unfair. A life insurance lawyer can help you in these situations. They can assist you in comprehending the issue, collecting proof, bargaining with the insurance provider, and acting as your legal representative in court if required.

A lawyer can review the case for mistakes or unfair practices and help reverse the denial or secure a settlement.

Purchasing Life Insurance When Seriously ill

I understand it’s not a pleasant subject, but sometimes people feel like buying life insurance when they’re seriously ill. They may have different reasons, like planning for their own funeral, relieving loved ones from financial burden, or leaving something for future generations, but buying life insurance while seriously ill is challenging and has implications.

Let’s be clear: Insurers assess potential policyholders’ risk through underwriting. They consider age, health, and lifestyle. So, getting life insurance can be tough and costly if one is seriously ill because insurers may consider them a high-risk applicant.

What is the contestability period in this scenario?

It is the same as in normal cases, but now the concept of “Tolling” the contestability period may be relevant here; it means “pausing” or “delaying” in legal terms.

Delaying the contestability period for life insurance is not something that everyone does, and it also doesn’t work everywhere. Sometimes, when someone gets very sick right after buying an insurance policy, there may be debates or legal disputes about this.

Some people may think it’s unfair for the contestability period to keep going when a policyholder is very sick and might not be able to fix any mistakes in their application. Tolling could make the process fairer.

However, tolling is complex and varies depending on the legal jurisdiction and specific circumstances. If one is thinking of purchasing life insurance while being seriously ill, it’s important to first speak with a legal or insurance expert because, ultimately, life insurance is meant to provide financial security and peace of mind, even during difficult times.

Does the Incontestability Clause Encourage Fraud?

This clause doesn’t promote fraud; it just creates balance. It prevents policyholders and their beneficiaries from facing unfair penalties due to honest mistakes or forgotten details.

Insurance companies have time to take action against intentional misrepresentations, omissions, or fraudulent acts.

This clause promotes honesty in the application process and emphasizes the importance of good faith in insurance contracts.

The Implications of the Incontestability Clause

This clause has its drawbacks too; once the contestability period ends, insurance companies find it harder to challenge a policy, which may lead to some people intentionally providing false information to the insurance company, knowing that after a specific period of time, the policy cannot be contested.

According to the Coalition Against Insurance Fraud, insurance fraud steals at least $308.6 billion every year from American consumers, and a small part of it may be due to this clause. Insurance companies do have fraud detection mechanisms, but if some fraudulent policies still slip through, it increases the cost of insurance for everyone.

Misrepresentations caused by an Agent’s Negligence

This clause also applies when an agent’s negligence causes misrepresentations on a life insurance application.

  • Example: If your life insurance application has errors due to your agent’s mistake or misunderstanding, what should you do? This may cause a misunderstanding, and what if the insurance company finds out about the discrepancy after the contestability period?

Usually, it remains valid even if the agent messes up, the insurer can’t cancel the policy or reject a claim after two years. It’s not fair to punish the policyholder for someone else’s mistake.

However, this doesn’t mean agents can be careless or negligent. They have a duty of care and must accurately record the information the applicant provides. Making mistakes or being negligent could harm their professional reputation.

Remember that every case is unique, and the decision can be influenced by factors such as policy language, insurance regulations, state laws, and the specifics of the misrepresentation.

Over to you

Have you dealt with contestability issues before?

or Do you have any helpful strategies or tips on this clause?

Your input can improve this guide for those who find it confusing.

Share your thoughts, experiences, and questions by leaving a comment below right now.

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