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Life Insurance 101: Understanding the Contestability Period

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A life insurance policy is a worthwhile investment, as it provides the beneficiaries a financial safety net after the policyholder passes away.

However, there may be instances when a beneficiary files for a claim on a life insurance policy, only to be denied by the insurance carrier. There are many reasons for an insurance company to deny a claim, something which usually takes place during the contestability period.

Contestability Period Explained

Simply put, the life insurance contestability is the window during which an insurance company can look into and deny a claim after a policyholder’s demise.  This period is, in most states, typically set at 24 months starting from the moment the first policy payment is made. This means that should the policyholder pass away soon after he or she started paying for the premiums, the insurance company has the right to delay payouts to the beneficiary until investigations are complete.

In this period, which lasts for two years under California law, your insurance provider will investigate the claim for your policy and can dispute it if they find that you withheld relevant information or misdeclared important matters, like medical conditions, during your application.

Vital information, such as pre-existing medical conditions, affects the price of your premiums as well as the benefits payout your beneficiary will receive. That is why your insurance company must have accurate information from you so they can provide the right policy and premium, from the start.

Why the Contestability Period Exists

Sometimes, people fail to provide or they withhold accurate information on their life insurance applications. Omissions or outright providing wrong information can mean better premium prices or policies that a policy applicant would otherwise not qualify for. Some people, though, make honest mistakes when applying for life insurance.
Because these mistakes can cost an insurance company more money in benefits payouts, they need to stringently screen for these errors during the contestability period and ensure that a policyholder provided the correct information, especially before making any payout to the beneficiary.  Insurance companies perform a thorough investigation or a reevaluation during the contestability period. Doing so protects them from with the possibility of paying out more than they would have, had the right information been provided at the onset of the policy application.

 

The Contestability Period and Your Death Benefit

Keep in mind that it is okay if your beneficiary files for an insurance claim after your passing and your policy is still in the contestability period.  Just because the insurance company is investigating the circumstances of your death and the information you provided on the policy doesn’t mean that they will reject the claim. As long as all the information you supplied during the application was accurate, your beneficiary should not have any problems with the insurance claim. As long as you supplied factual, accurate information and paid your premiums on time, your beneficiary will receive the full payout when it comes time to claim on your life insurance policy.

 

Get Life Insurance Claims Assistance

If you have any concerns or questions about your policy and your rights, don’t hesitate to talk to a life insurance lawyer. At Haffner Law, we provide assistance for policyholders in Los Angeles. If your claim gets denied and you need to appeal, our experienced attorneys will work with you tirelessly.

Call us at 1-844-HAFFNER (213-514-5681) now to arrange a no-obligation consultation.

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