Every consumer I talk to doesn’t know what a contestability period is, which is understandable since people don’t ordinarily spend their time reading insurance contracts. The contestability period is arguably one of the most important clauses of a life insurance contract. It says that a death claim can be contested (investigated) for the first two years of a policy. Best case scenario: a death in the first two years of a policy will slow down a benefit payment for a few weeks as the claim is investigated. Worst case scenario: the claim is denied because the insured answered the underwriting questions incorrectly. If a claim is denied, all premium payments are refunded, along with a small percentage of interest, but no death benefit is paid.
If you ever decide to switch life insurance companies, the company being replaced will often bring up the contestability period as a scare tactic. While it is true that a new policy means a new contestability period, there is little to worry about if you are being honest on the application. You can contact us to learn more.