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What is a contestability period and how does it affect you?

If you have life insurance, you may have heard of something called a dispute period. (If you do not do it have life insurance, we can help you get started with it.)

So what is a contest period? In short, there is a period of time after you get life insurance when, if you die, an insurer can investigate the circumstances surrounding your death.

Why your insurer might investigate a death, and what the results of that investigation might mean, require a little more explanation. Read on to learn more about what a contest period is and why it’s important.

What is a competition period?

The contestability period is a period of time (generally two years) after a life insurance policy starts covering when the policy issuer can contest a beneficiary̵

7;s claim. This period is to prevent life insurance fraud. For example, someone may attempt to purchase life insurance after receiving a terminal medical diagnosis without revealing the truth to the insurer.

While this period protects the insurer from fraud, it is not designed to prevent the beneficiaries of honest policyholders from receiving their benefits. That’s why, to be clear, the competition period is not a period of time in which an insurer can deny all claims.

Even if you die within the contestability period of your life insurance policy, it does not necessarily mean that your beneficiaries will not receive the payment. It may be delayed while the investigation is ongoing. If the provider finds something that makes it question the validity of your application, it can still make the payment after taking into account any discrepancies.

An important point is that, as with most things in life, honesty is the best policy when trying to get life insurance coverage. If you lie on your life insurance application – about your health, whether you smoke or anything else – you risk the policy not being issued or the death benefit not being paid to your loved ones.

How does the competition period work?

If your beneficiary makes a life insurance claim within the contestability period, the insurer may open an investigation. The provider will review your medical records, review a copy of your death certificate and any other relevant information, and make a decision based on what they find.

In most states, the investigative process must be completed within 30 days. Once the decision is made, the provider will notify the beneficiary with an approval or denial.

Here are some things that may come out of the investigation:

No death benefit

Brass thanks, this is the big problem: If the insurer determines you lied on your application, especially about something material, your coverage could be compromised. Suffice to say, buy life insurance for the peace of mind that comes from knowing your loved ones are financially protected should the worst happen to you.

Getting that peace of mind through fraudulent means is hardly peace of mind at all.

A reduced death benefit

If you misled your insurer on your application, your beneficiary’s life insurance claim may not be denied outright, but it can still be significantly affected.

For example, if you were a smoker but claimed not to be and then died of lung cancer during the contestability period, the claim may be rejected. When the claim is rejected, all premiums paid to the beneficiary are refunded.

Translation: Your loved ones will get less money than expected because you underpaid for your coverage.

What about suicide?

Another reason for the contestability clause is the possibility that someone will buy life insurance with the intention of committing suicide. This is obviously a tragic situation, and an insurer does not want to encourage people who are having suicidal thoughts.

Suffice it to say, this is a difficult situation for everyone involved. If an insured commits suicide during the two-year contestability period, the insurer will almost certainly not pay the death benefit. Instead, the beneficiaries will get back the premiums that have been paid, and it will be as if the policy was never taken out. (After the contestability period, it may depend on your insurer.)

Another thing: If you’re having suicidal thoughts, you can call the National Suicide Prevention Lifeline at 1-800-273-8255 (TALK).

How long is the competition period?

Again, the contestability period generally lasts two years and starts when you make your first payment. So if you were approved for life insurance coverage on August 15th and made your first premium payment on September 1st, your contest period begins on September 1st.

It is important to know that your policy may lapse during the eligibility period if you fall behind on your premiums. If this happens, you will need to apply for life insurance again, and your competition period will start over if you are approved.

Can a claim be paid out during the contestability period?

Yes. If you die during the contestability period and your beneficiary makes a claim, the insurer is obliged to pay the benefit unless it finds that you withheld information or lied about something in your application. The provider has 30 days to make a decision and notify your beneficiary during this period.

Let’s be honest: We at Haven Life want to make life insurance simple and easy for you and your loved ones. Getting affordable life insurance is a great way to take care of your family should the worst happen. To get the most peace of mind from your policy, be truthful and provide accurate information on your application. Honest.

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