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What is the 'contestability period' for life insurance policies?

When you get life insurance, you aren't trying to dupe your insurer or commit any fraudulent acts. All you are trying to do is protect yourself and your family in case of a truly tragic event. Life insurance is a vital asset to many people all across the country. However, life insurance providers are obviously wary about who they are insuring and why. As such, life insurance providers place "contestability periods" into their policies to protect themselves from potentially dubious clients.

So what is a contestability period? It is a period of time after a life insurance policy is signed -- usually consisting of two years after signing -- where the company can contest the policy and delay paying out the policy to the beneficiaries as they investigate the circumstances of the policy holder's death, as well as the provisions and conditions of the policy itself.

 

If the policy holder or the family failed to give the insurance company necessary information regarding the holder's medical condition, or if they were not honest about other information when the policy was created, then the life insurance company's contest could be justified, and it could lead to a denied claim or a reduced sum of money for the policy.

There are two lessons to learn from this. The first is that you should be honest and tell the truth when dealing with your life insurance company. The second is that if your claim is denied, especially during the contestability period, you should consult with an attorney.

Source: NerdWallet, "The Life Insurance 'Contestability Period' Explained," Barbara Marquand, May 25, 2016

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