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What Is an Incontestability Clause in Life Insurance?
<lingo>An incontestable clause, or incontestability clause, is one that prevents the issuer of the life insurance policy from canceling the policy over a misstatement by the policyholder. In most cases, it applies only after a specific amount of time has passed since the policy was put into place. Most life insurance policies will have this clause as a way to protect the person paying into the policy over the course of time. It works to protect the named beneficiary in a variety of situations if the issuer tries to void the policy.</lingo>
Incontestability Clause Clearly and Briefly Defined
Most life insurance policies include an incontestability clause that applies two or three years after the policy is put into place. It makes it impossible for the insurance provider to void the contract, or life insurance policy, over a misstatement made by the policyholder. There are limitations to this clause, though. It does not apply in situations where outright fraud has occurred, which means that if the individual lies on his or her policy, that will not protect them from having the policy voided. It protects against things like not providing complete information or providing information that is unclear.
<twitter>An incontestable clause, or incontestability clause, is one that prevents the issuer of the life insurance policy from canceling the policy over a misstatement by the policyholder. In most cases, it applies only after a specific amount of time has passed since the policy was put into place.</twitter>
If a person with a life insurance policy, for any reason, lies about his or her health, identity, or other key information, it is possible for the life insurance company to cancel or void their policy if they find out about it. This also means the policyholder has no recourse for obtaining funds that he or she paid into the policy to that point. Any instance of deceit does not apply to the incontestability clause.
Overall, the incontestability clause is an important one to protect the beneficiary of the funds and the policyholder. Many times, this is one of the only clauses applicable for protecting your investment in the life insurance policy. When buying life insurance, then, individuals should ensure this clause is present. They should also learn when it becomes applicable, as that is when this type of protection is put in place to minimize risk to the holder.
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