Incontestability Clause
The incontestability clause is a life insurance policy provision stating that after a specified period (usually 2 years), the insurer cannot contest or void the policy based on material misrepresentation in the application, except for fraud.
Exam Tip
Incontestability = after 2 years, insurer CANNOT deny claims for misrepresentation. FRAUD is the exception—can always be contested!
What is the Incontestability Clause?
The incontestability clause protects life insurance policyholders by limiting the insurer's ability to deny claims after the policy has been in force for a specified period (typically 2 years). After this period, the insurer cannot challenge the policy's validity based on misrepresentations in the application.
Key Provisions
| Feature | Description |
|---|---|
| Period | Usually 2 years from policy issue |
| Protection | Policy cannot be voided for misrepresentation |
| Exception | Fraud may still be contested |
| Required | Mandated by state law |
Before vs. After Incontestability
| Period | Insurer's Rights |
|---|---|
| First 2 Years | Can investigate and deny claims |
| After 2 Years | Cannot contest policy validity |
| Exception | Fraud may be contested anytime |
What It Protects Against
| Protected | Example |
|---|---|
| Age Misstatement | Policy adjusts but pays |
| Health Omissions | Cannot deny claim |
| Lifestyle Errors | Cannot void policy |
| Innocent Mistakes | Protected after 2 years |
What It Does NOT Protect
| Not Protected | Example |
|---|---|
| Fraud | Intentional deception with intent to defraud |
| Impersonation | Someone else took medical exam |
| No Insurable Interest | Policy taken out illegally |
| Material Fraud | May still be contested |
Incontestability vs. Contestability
| Clause | Period | Insurer Action |
|---|---|---|
| Contestability | First 2 years | CAN investigate/deny |
| Incontestability | After 2 years | CANNOT void policy |
Reinstatement and Incontestability
If a policy lapses and is reinstated:
- New incontestability period may begin
- Applies to reinstatement application statements
- Original policy statements may still be protected
State Law Requirements
| Requirement | Standard |
|---|---|
| Maximum Period | 2 years (most states) |
| Some States | 1 year for certain policies |
| Suicide Clause | Separate 2-year provision |
Important Distinctions
| Issue | Treatment |
|---|---|
| Innocent Misrepresentation | Protected after 2 years |
| Negligent Misrepresentation | Protected after 2 years |
| Fraudulent Misrepresentation | May never be protected |
Study This Term In
Related Terms
Contestability Period
InsuranceThe contestability period is typically the first two years of a life insurance policy during which the insurer can investigate and deny claims based on material misrepresentation or fraud in the application.
Underwriting
InsuranceUnderwriting is the process by which an insurance company evaluates risk and determines whether to accept an application for coverage and at what premium rate.