Life insurance is designed to ensure your family, friends, or loved ones are taken care of during a very difficult time during their lives as they make final arrangements for you. Millions of Americans have taken out life insurance policies seemingly secure in the knowledge that, one day, if the worst happens, there is a fallback that will help stop hardship, pain, and a parade of horribles from creating negative financial and emotional consequence for their loved ones. This provides peace of mind and a guarantee in the back of the applicant’s head that even when the worst happens, the absolute worst will not happen to their family or other loved ones reeling from a death of someone important in their life and on who they likely depend on financially. This is as reliable as the sun rising or falling or the sky being blue in their minds. I filled out my life insurance form so I must have complete and total coverage. It is a “set it and forget it” way of thinking that can lead to disaster or financial ruin. There is no worse feeling than relying on a life insurance policy and waking up to discover that what you that was secure is truly a house built upon sand due to a non-disclosure of information. We handle life insurance claims not paid.
Life insurance is much relied upon but is not often understood past the initial application when the person applying for life insurance applies and it is accepted by the company. Thousands every month fill out applications like this without much thought by checking boxes without truly considering what their health history is and without thinking too much of the guarantees they are making about themselves and how they are gambling with their families’ and loved ones’ futures. For so many Americans, filing this application with the life insurance company directly or with the life life insurance company through their employer means filing the information away in a drawer until the unfortunate and fateful day that a loved one needs it to make rent, pay for food, funeral, medical, or other expenses. For some, it comes as a surprise that the contestability period surrounding life insurance claims causes unneeded delays or even a voiding of the policy. Here’s what to do when you have a question or multiple questions regarding the contestability period surrounding life insurance claims.
What is a life insurance contestability period?
The life insurance contestability period is a period of time from one to two years where the life insurance company can review your life insurance policy for any reason. This includes for any inconsistencies, fraud, misrepresentation, omission, or any other piece of information that could otherwise invalidate the policy. This is designed to protect the insurer from any lie or omission which could materially alter the policy or the terms of the policy which would have impacted how coverage is provided or given to the insured. One of the ways they can recoup their lost investment is reducing the payout by subtracting the amount of money you should have been charged in premiums from your loved one’s final award. It is important to note that a contestability period is different from a suicide clause, which has strict rules governing payouts to the beneficiaries of an insured. For more information on a suicide clause and how it may apply to you, please consult your policy.
For example, if you do not provide all relevant information on the life insurance application and it is later discovered you had a disease that would have impacted the insurer’s decision, the life insurance company may cancel and reduce your policy. For example, if you did not disclose your recent bout with cancer, your current obesity, or any other relevant illness, there may be serious grounds to revoke or greatly reduce the life insurance policy’s benefit. Additionally, you do not have to die of the illness you failed to disclose, such as if you are a three-time cancer survivor, to have the benefit reduced. You can pass away in a fatal car accident and if it was discovered that you did not disclose your cancer history, the award can still be reduced.
When would the contestability period be considered?
There are a variety of reasons that a life insurance company investigator looks into the circumstances surrounding someone’s death during the contestability period of a life insurance policy and there is not exact formula or proverbial “secret sauce” to determine how these decisions are made. One of the reasons may be a death suspiciously flagged for an investigator is the manner or timing of death. Another example may be an inflated amount of money commensurate to the person’s worth or expected earnings. Finally, there may not be one particular reason but if something seems “off” on an application, an life insurance company inspector may invoke the contestability period and begin an investigation into the application and if there was a material misrepresentation. A material misrepresentation is an erroneous entry on an application for life insurance that may have made the life life insurance company make a different determination than they otherwise would have. It does not need to have been intentional that you did not accurately fill out the form for it still to be material.
For example, if a person came into the office two months prior to their death certifying that there were no underlying conditions yet died from a preventable condition then it seems at least fairly likely that an insurance investigator would undertake an investigation. Another example might be a person who has undertaken a life insurance policy who has a family history of heart disease yet does not list it. When their heirs come to collect, they may be asked about overall family history and other important information that the insured neglected to mention to the company. There are many ways to trigger the contestability period on a life insurance policy if you are anything less than fully truthful when filling out your application.
What do I do if there is an investigation during contestability period?
First off, an investigation into a life insurance policy during the contestability period does not automatically mean that there will be a denial of coverage. It only means that there is a question of coverage or ability or eligibility for coverage at a certain level that the life insurance company investigates during the contestability period to ensure that everything has been properly accounted for and that there is not a scintilla of a question regarding the ability for a payout to be made in a full and complete manner that follows the intent and letter of the contract for life insurance.
Additionally, you should cooperate as much as possible with the life insurance company’s investigation during the contestability period so that you can work to get the maximum amount of money due to you, which may in fact be the whole amount under the original policy. “Hiding the ball” or being less than forthcoming about any questions an life insurance company investigators asks during the contestability period may only deepen suspicions regarding misrepresentations or may even give rise to an allegation of fraud. Be sure to provide all relevant medical records and medical histories to help ensure that during the contestability period, you’re in the best position possible to recover the most money you can.
For example, if an insurance investigator during a contestability period investigation asks family for medical records related to the cause of death, that investigator will expect it within a reasonable amount of time. Hemming and hawing or otherwise delaying, even if done with no ill intent may only delay and actually diminish your chances at obtaining the recovery that your loved one intended. However, some investigations wrap up fairly quickly and there is little need for other, supporting documentation.
What happens once an investigation is completed during the contestability period?
Once an investigation has been completed during or immediately following the contestability period, one of two actions can be taken by the life insurance company in determining how to allocate your coverage, if at all. The most beneficial action that can be taken after an investigation into the appropriateness of insurance coverage during the contestability period is finding that there was no material misrepresentation and that the full amount due under the policy will be paid quickly and with no delay. For example, this situation would occur if an insurance investigator determines during the contestability period investigation that an omission of suffering from severe glaucoma would not have impacted how or why the life insurance company provided life insurance coverage or the total amount of coverage and associated premiums.
On the other hand, if the life insurance company investigator during his contestability period investigation determines that an omission or erroneous declaration constituted a material misrepresentation, there are several actions they can take. The first, and most severe, is to cancel the life insurance policy outright leaving potential heirs or beneficiaries with nothing from the policy. The other option is, if the investigator determines there was only a partial issue with the amount of money paid in premiums and the insurance policy would have been approved otherwise, they can subtract the amount of money the insured would have paid in premiums from the final recovery for the beneficiaries. For example, if the insured would have paid $2,000 a month with the knowledge now acquired by the insurance company, instead of the $1,000 a month they paid in premiums, the insurance company will deduct that money from any potential payout to the heirs or beneficiaries.
Is there any benefit is my claim is fully approved after an investigation during the contestability period?
Thousands of Americans live wondering whether they will ever see the money they are relying on from their loved one’s life insurance policy. This necessary money needed to cover food, gas groceries, and other necessities of life is sometimes the difference between financial ruin and maintaining the quality of life that they are accustomed to. When an insurance company finally approves your claim after the contestability period investigation is over and they are satisfied with all the answers, you may still be on the losing end due to having to take out a loan to cover your bills or putting them on a high interest credit card that does nothing for you financially except get you deeper in debt until the life insurance check comes.
However, there is a silver lining to this. Whenever an approved claim is delayed due to a contestability period investigation, interest is added on to the final amount of money given to the beneficiaries. This can help defer putting it on a credit card or other financial instrument. Additionally, if you had the cash on hand, it may help you come out ahead. For example, if you were waiting 6 months for a contestability period investigation to be completed and otherwise had no use for the money, your approved payout will be higher than the policy limits as the payout was held for a period of time pending investigation.
What is the best way to avoid a contestability period investigation in the first place?
In a few words: be truthful. Contestability period investigations by a life insurance company occur because they do not believe they have all the facts necessary to approve a pay out of the policy to the insured’s beneficiaries. An insured should always answer to the best of his or her knowledge in order to ensure that his or her beneficiaries don’t have to deal with a life insurance company investigator asking questions and holding up a necessary life insurance check. For more information on how to avoid being on the wrong side of the contestability period, call our office today to schedule a free consultation.
Life insurance is designed to ensure your family, friends, or loved ones are taken care of during a very difficult time during their lives as they make final arrangements for you. Tens of millions of Americans have taken out life insurance policies that will take care of their loved ones long after they are gone so their loved ones can pay the bills including rent, food, medical, and even any funeral expenses. Doing this, the insured feels a certain peace of mind that no matter what happens, their loved ones will be covered financially and there will be no repercussions financially after the death. However, there are times during the “life” of the life insurance policy where the insurance company can investigate the claims made on the application for life insurance. This is called a contestability period.
Many Americans fill out the life insurance policy and believe that is the end of it. They leave it in a drawer for safekeeping and for “when the day comes.” When the day does, sadly, arrive there may be a delay, shockingly to loved ones who expect a policy payout, due to the insurance company conducting an investigation during the contestability period. Here’s what to do when you have a question or multiple questions regarding the meaning of the contestability period when it comes to life insurance.
The meaning of the life insurance contestability period for most is that it directly impacts them during the first one or two years when an insurance company reviews the application for life insurance especially if there is a death triggering the policy payout. This review can be fairly thorough and can and will likely include an investigation for any inconsistencies, fraud, misrepresentation, omission, or any other piece of information that could otherwise invalidate the policy. This contestability period is inserted into the period so the insurer has the ability to check whether the claims made by the insured as to their health, both mental and emotional, as they signed the contract for life insurance. If the insurance company finds, during the contestability period of the life insurance policy, that there was indeed an issue with the claim, they can either void the policy and not issue a payout or they can also subtract premiums owed to them. The way an insurance company would subtract the money it is owed to is calculate the amount of money that would have been paid in premiums and then to subtract that amount from the final payout. Crucially, a contestability period is different than a suicide clause which has very different rules regarding payouts if the insured dies by his or her own hand. If you have any questions on the difference between a contestability period versus a suicide policy, please contact our office and consult your policy.
When would the contestability period be something a life insurer considers opening or investigating a claim during such a time?
A life insurance company investigator can use any reason or no reason at all as the basis of an investigation during the contestability period of a life insurance policy pending payout. A motivating factor may be suspicious timing of the death. For example the policy holder, also known as the insured, may have taken out a policy six months before and then died suddenly of a condition that looks suspicious. Another suspicious factor may be the amount of money the insured’s life was valued at in the policy versus actual or expected earnings over time. Additionally, there may not be a particularly obvious reason but the investigator may feel something is simply not right with the application or reason for the payout. Sometimes, they may come upon what is referred to as a material misrepresentation as part of their investigation. In many life insurance contexts, a material misrepresentation is a statement or affirmation that would have caused the life insurance company to make a different decision than it did absent the misleading statement. Some believe the statement must be intention to be material but, in fact, any misrepresentation may call the policy into question regardless of the intention of the insured. For more questions on the meaning of the life insurance contestability period, contact our office today.
What do I do if there is an investigation into the life insurance policy and payout during the contestability period?
An investigation into the life insurance policy during the contestability period is not an immediate cause for concern by any of the primary or contingent beneficiaries. This only means that the insurance company investigator wishes to ascertain more about the application and the condition of the insured when he or she died. However, if the insurance company investigator has more questions, the best course of action is to contact a life insurance policy attorney who specializes in contestability periods.
As you and your attorney work together, you should gather all relevant medical documents, pay stubs, and copies of the policy so your lawyer is armed with all the information he or she needs to confront the insurance company’s investigation. Our firm’s lawyers are experts at helping life insurance policy beneficiaries get the relief they need during and after the contestability period. For many, the insurance company will use an error found during the contestability period to defer, reduce, or deny payment altogether.
What do I do if I have more questions regarding the meaning of the life insurance contestability period?
The meaning of the life insurance contestability period can be a fraught and scary topic for those who are unfamiliar with life insurance policies, who intend to get a life insurance policy, or believe that there is a payout due to them under a life insurance policy. If you have any questions whatsoever regarding the meaning of the life insurance contestability period in a life insurance policy, please contact our experience attorneys today so they can help ensure you get the payout you deserve.