Life Insurance Contestability Period: What Is It and How Does It Affect Me?

I do my best to plan ahead, but sometimes time gets the better of me and I end up in a last-minute scramble. I’ve signed a lot of birthday cards in the car on the way to the party, if you get me. 

So when it came time to think about life insurance (read: I had a baby on the way and wanted coverage to start now), I was concerned when I learned that my policy would be under a “contestability clause” for two years. 

Did that mean it would take two years for my policy to provide the protection I wanted it to? Thankfully, not the case! 

Here’s what I learned about how life insurance contestability works, and what I could do to make sure my application was in order.

What Is a Life Insurance Contestability Period?

A life insurance contestability period is a short time after opening a policy when the life insurance agency can investigate (and possibly deny) claims. The contestability period is typically one to two years, depending on your state. This is standard across various companies.

If you pass away during the contestability period, the life insurer can open an investigation before paying the claim. That doesn’t mean that they are specifically trying not to pay your life insurance beneficiaries! It just means that they have the option to take a closer look, if they want to.

If there are no issues with your application, you’re good to go: The company will most likely pay the death benefit to your beneficiary (here’s how your beneficiary can use that life insurance payout). If there’s a problem, the insurance company might pay a reduced benefit or even deny the claim, depending on how serious the issue is.

How Does a Life Insurance Investigation Work?

If someone dies during the contestability period, it’s common for the insurance company to investigate. An investigation doesn’t mean the insurance company suspects that there is a problem. Most insurers simply choose to exercise the option because it’s available. 

In a nutshell, they’re checking to see if you misrepresented yourself at all on your original life insurance application. “They’re looking for inconsistencies between the answers on the application and any conflicting evidence to those answers. That includes medical information, any history of incarceration, even your driving record,” says Steven Burgess, founder and President of CFLID. 

“There are very detailed medical questions on the application, and that’s really the primary area that the insurance company is looking at when they’re doing their investigation after the death,” he says. “They assign people to read through those in great detail and look for any kind of evidence that the person had a medical condition or was treated for a medical condition that they didn't disclose.”

The length of the investigation can vary depending on whether the insurance provider finds anything they need to follow up on, but it can be a matter of several months.

Will Life Insurance Pay Out During the Contestability Period?

If you pass away during the contestability period, what are the chances that your beneficiaries will actually get the insurance money? 

If the information on your life insurance application is accurate and the death is from a cause that’s covered (e.g., not through suicide), then the claim should pass the investigation and your beneficiaries should get the full payout, even if the policy’s only been in force for a day.

You hold a lot of power when it comes to whether your policy will pass an investigation. If you are misleading on your application, your beneficiary is much more likely to run into problems later. Following a few best practices can help you feel confident that you’re completing your application correctly.

Ask an agent

Burgess says, “The average person is not trained to understand the intent behind the questions on a life insurance application.” So, if you have any questions, he recommends asking an expert—namely, an insurance agent. 

For example, if you answer that you have no chronic conditions, but you’ve been seeing a chiropractor for a few years to keep back pain in check, the insurance provider might consider that to be an incorrect answer. 

Fabric staffs its customer support team with licensed agents, so if you get confused about any portion of the application, ask away! You can reach out by choosing “support” from our website menu.

Review your application

Ultimately, whether you fill out the application online or work with an insurance agent, you’re responsible for the accuracy of the information. Before you submit the application, review each answer carefully to make sure everything is correct.

What Happens If the Investigation Uncovers a Problem?

If the information on your application is accurate, the contestability period investigation can add some time before your loved ones get the death benefit, but they should ultimately receive the full amount. 

If the investigation uncovers a problem, however, that can affect the payout.

Material misrepresentation

Life insurance companies are looking for material misrepresentations on the application. That means information that could have made the difference in how the insurer classified your level of risk or whether they would have denied you coverage. (Here’s more about how life insurance underwriting works.)

If the life insurance company finds material misrepresentation, they can respond in a few different ways. This will depend on how severe the inaccuracy is:

• Retroactively increase premiums: If the missing information means the insurance company would have classified you as higher risk, one option is to retroactively adjust what they would have charged in premiums. In this case, the insurer might deduct the difference in premiums from the death benefit before paying out.

• Deny the claim: If the insurance company finds a major issue that would have affected whether they’d offer coverage at all, they might deny the claim. For example, if you were diagnosed with cancer and the diagnosis date was misrepresented on your application, that might have been a dealbreaker for the insurance provider.

Death by suicide

A life insurance contestability period is often easy to confuse with the suicide provision (a clause stating that the policy will not cover death by suicide, typically for the first two years). These appear on most life insurance applications, and they’re not exactly the same thing.

Contestability is about reviewing the application for inaccurate or misleading information. The suicide provision, which also typically extends for the first two years that the policy is active, doesn’t depend on the application.

“The suicide provision says even if the application is free of any material misrepresentations, the company does not have to pay the claim” if you die by suicide, Burgess says.

Losing someone to suicide is a tragedy. Part of the intention of a suicide provision on life insurance is to avoid cases where a person might see life insurance as a way of putting their finances in order before harming themselves. If someone dies via suicide during the time when the provision applies (generally two years), life insurance companies will often return the premiums to the beneficiary, but they will not pay the death benefit.

How Much Detail Do I Need to Give on My Application?

If you left out an important nuance, your claim could run into trouble, even if the information that’s there isn’t technically untrue. For example, maybe you mentioned you’re an avid cyclist, but left out your passion for bicycling down active volcanoes. 

The application asks about your hobbies to assess risk. It can be considered misleading to give a partial answer that withholds critical details that would affect an underwriter’s calculations.

On the other hand, Burgess says you’re only obligated to provide the information that the application asks for.

“If you’re a scuba diver and you disclose that, and they ask how often you dive and that’s all they ask, that’s as far as you’re obligated to go,” he says. You don’t need to estimate exactly how many sharks you’ve encountered.

The safest course is to read each answer carefully, be honest and ask a licensed agent any questions along the way. (Note that Fabric’s customer support is run by a team of qualified agents—you can ask questions by choosing “support” from the menu on our website.) 

Can They Deny My Claim After the Contestability Period Is Over?

After the contestability period ends, the life insurance company doesn’t have the option to open an investigation anymore. Your beneficiary submits the claim, and in most cases they can expect to receive the benefit in a few weeks. 

The main exception is if the life insurance company suspects insurance fraud, or deliberate misinformation on your application. 

For example, if you were honest about being a former smoker but misremember the date when you stopped smoking, it’s not necessarily fraud (though it could show up in a contestability investigation during the first two years). 

But if you say you’re a nonsmoking marathon runner who works a computer job—and then you die of miner’s lung—an insurance company might take steps to open a fraud investigation, even after the contestability period ends.

Contestability Periods Can Start Over

In most cases, the contestability period is over after those one or two years after the policy becomes active. If you’re making changes to your life insurance, though, some adjustments can restart the contestability period.

If your policy lapses because you weren’t keeping up with premium payments, the contestability period can restart when you reinstate the policy. Usually, life insurance policies come with a grace period to catch up on payments before your policy becomes inactive. Read up on your policy or contact your provider for more information.

If you roll over the cash value of a permanent life insurance policy into a new policy, which some people might do to transfer to a policy that could grow cash value faster, contestability would restart for the new policy. (Here's more on term vs. permanent life insurance.)

Finally, in some cases, adjusting your coverage could partially add a contestability period. If, for example, you increase the death benefit from $500,000 to $750,000 after four years, the insurance provider might include a contestability clause for the additional $250,000. So if you died within two years of the adjustment, the insurance provider should pay the $500,000 without an investigation (because it’s after the original contestability period), but they could conduct an investigation before paying the additional $250,000.

(Note: Not all companies support adding coverage after the fact. Policies sold through Fabric enable you to lower your coverage amount after purchasing, but you cannot raise your coverage amount after you apply or a policy is issued.)

The bottom line? When you buy life insurance, you’re covered as soon as the policy goes into effect. And as long as you didn’t misrepresent yourself on your application, you can expect that your loved ones will receive the benefits of your policy. 

The contestability period simply allows insurance providers time to investigate claims. If you’ve held up your end by providing thorough, accurate information when you applied, you can feel assured that your loved ones will get the benefit you’re hoping to provide for them.

Fabric exists to help young families master their money. Our articles abide by strict editorial standards.

Information provided is general and educational in nature, is not financial advice, and all products or services discussed may not be offered by Fabric by Gerber Life  (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Consult an attorney or tax advisor regarding your specific legal or tax situation. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. The views and opinions of third-party content providers are solely those of the author and not Fabric by Gerber Life.