When can insurers deny claims based on contestable clauses?

Insurers have the right to deny claims based on contestable clauses within the first two years of a life insurance policy being in force. This is designed to protect insurers from fraudulent applications and misrepresentations. During this contestability period, an insurer can investigate the validity of the claim and the accuracy of the information provided by the policyholder.

If the policyholder misrepresented their health status or other vital information when applying for the policy, the insurer can use this contestability clause to deny a claim. After this two-year period, the insurer typically cannot refuse to pay the death benefit based on issues that occurred during the application process, as the policy is considered to be in effect and the insurer accepts the risk associated with the policyholder.

This clause ensures that both the insurer and the insured are held accountable for truthful representations, fostering a sense of integrity within the insurance process.