The contestable period, as outlined in the policy, represents a timeframe during which a life or health insurance company can safeguard itself against material misrepresentations made by a prospective insured in the insurance application.
Contestable periods vary by insurer and are typically 1-2 years, with extended contestable periods for fraud.
Let's assume. for example, that you applied for a life insurance policy and lied on the application that you never smoked. If during the contestable period the insurance company discovers that you in fact smoke like a chimney, they can rescind the policy, and refund your money. If, however, they discovered this after the contestable period had expired, they might not take the policy away from you unless there has been fraud.
With respect to "banking on the policy", there is plenty of evidence that insurance companies pay claims during the contestable period after a satisfactory contestable review.
If you prepay your life insurance application or disability insurance application you will receive a conditional receipt. The receipt spells out the conditions for which a claim will be paid during the underwriting period. Assume someone dies in a motor vehicle accident one month after a life insurance application and insurance physical have been submitted to the insurer. Should there be a claim during this time, the insurance company will typically continue underwriting the application as if the decedent were alive, collect all the underwriting requirements to determine if the decedent would have been insurable. If so. it pays the claim.
The contestability period is a crucial factor to consider when replacing one insurance policy with another
The classic scene from Universal Pictures' Along Came Polly (2004), features a passionate promotion of risk taking "Leland Van Lew" (portrayed by Bryan Brown) for insurance by "Sanford Lyle" (portrayed by the late Philip Seymour Hoffman d. 2014) to a panel of "insurance underwriters". What is notable is that "the insurance" was approved after FULL DISCLOSURE.
Leave a Reply