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Under Texas law, life insurance companies have the right to contest any life insurance claims that are made within a two-year time period after the day that the policy goes into effect. Know as a period of contestability, this clause can result in the denial or reduction of payment of some insurance claims.
The contestability period exists so that insurance companies can prevent many cases of cheating and fraud. Such instances may include a policyholder who attempts to procure life insurance shortly before his death, or in which a policyholder may lie to procure lower premiums. During this period, an insurance company can examine the policyholder’s application, investigate his or her medical history, and ascertain whether something was materially misrepresented. When you buy a life insurance policy, it is vital that you understand what the contestability period is and how it might affect future claims.
If an insurance company finds that material misrepresentation occurred, three things may happen in response:
- The insurance company investigates the claim and makes the payment in full.
- The insurance company discovers a misrepresentation that would have changed the premium amount paid by the policyholder. They then subtract the higher premium from the payout.
- The insurance company discovers a mistake in the application that would have led to a life insurance policy denial. In this case, the payout is not maid, but the beneficiaries receive whatever premiums the policyholder made in the past.
If you have filled out your life insurance policy application thoroughly and honestly, you should not have to worry about the period of contestability, or even about an investigation in the event that a policyholder dies within the two-year window. If your insurance company contests a life insurance claim during the contestability window and you believe that they are wrong to do so, you should immediately speak with an attorney about your case.
At Voss Law Firm, we help families in Dallas and across Texas with their life insurance claims. To learn more about our services or to request a free consultation, contact us today.
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