The contestability period is a condition in a life insurance policy that allows the insurance company to contest or question the claim made by the policyholder’s beneficiaries if the policyholder dies within two years of acquiring the policy. In such instances, the insurer has the authority to request verification of the buyer’s personal information. This clause allows insurers to decline or cancel a claim filed before the policy’s two years of the contract date. They even have the right to withhold part or all of a beneficiary’s benefit payment in some situations. This aids in the prevention of fraudulent claims. Some firms also contain a condition that states that if the policyholder commits suicide within two years of purchasing the coverage, the company will reimburse the premium.
Here are things you should do to prevent the breach of contract
- Lying about your medical condition
- bad habits
- drug abuse
- past health status
- dangerous job profile
- and other addictions that are considered as discrepancies.
Deceiving the insurer by presenting inaccurate information is considered as breaching of the contract. In that case, the company usually has the right to verify the authenticity of the insurance claim.
Insurance companies frequently settle challenged claims in one of the following ways:
In the case of genuine claims
If the policyholder’s information on the application form is deemed to be correct, the insurance company approves the claim and adds interest to the total compensation to compensate for the time lost due to the contestation procedure.
In the event of an information breach
After deducting the additional premiums that would have been charged if the actual information had been disclosed at the time of purchase, the insurer normally distributed the death benefit to the beneficiaries. For example, in the case of a smoker or drinker, the excess amount paid in premiums will be subtracted from the total death benefit. In such situations, the corporation may entirely reject the claim and return the premiums to the recipients. However, insurance companies only take such drastic measures when new facts about a policyholder’s medical history, health, work environment, and other factors go beyond the scope of the policy’s coverage.
Here are key points that everyone should know about the contestability period about life insurance policy are as follows:
If you lie on your life insurance application form to earn low-rate premiums, it could be disastrous for your loved ones after you pass away. If you lie on your life insurance application form, claiming that you will be able to live through the contestability term, your policy claim may be denied or canceled after your death. You have to verify that no information submitted on the application form is fraudulent or erroneous, as you are purchasing the policy to ensure the future of your family members when you are no longer able to provide for their financial needs. On the other hand, Even if insurance companies have the authority to examine and verify any claim filed during the contestability period. They must pay the policyholders’ families the death benefits if the information is proven to be accurate. In addition, If the insured person dies during the contestability period. The family may have to wait a long time to receive the money until the firm analyzes the situation and is pleased with the results.