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Incontestable Clause

What is an Incontestable Clause?

An incontestable clause — also called an incontestability clause or incontestability provision — is a feature of most life insurance policies that says that after a certain amount of time, the life insurance provider cannot contest claims made against the policy (assuming the policy owner is up to date on premium payments).

Contesting life insurance

In an effort to prevent fraud, life insurance companies might investigate the death of an insured, especially if they pass away shortly after the policy was purchased. If they find that the insured falsified information or misled them during the underwriting process (e.g., hid a smoking habit or a health diagnosis), they can contest the claim. That could mean the policy’s beneficiaries don’t get any money from the insurer after the insured dies.

That could leave policy owners wondering if their beneficiaries will get the money they need. To avoid that stress and uncertainty, most life insurance policies come with an incontestable clause that activates after a period of two or three years.

Once the clause comes into play, the insurance provider can no longer void the policy, even if they discover minor misstatements. The incontestability provision essentially guarantees that the beneficiaries will receive the death benefit, assuming the policy owner has consistently paid their premiums on time.

It’s important to delineate between minor misrepresentations and full-fledged fraud. While the incontestable clause protects policy owners if they made a small mistake on their insurance application, it won’t generally apply to overt lies or critical omissions.

In the event of fraud, the insurance company is not liable to pay out the death benefit. That’s why it’s important for life insurance applicants to be as honest and forthcoming as possible during the underwriting process.

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