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Things to know about the contestability period in life insurance

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The contestability period is a vital clause in a life insurance policy which every policyholder should know in detail. It starts from the date of issuance of policy and lasts for a duration of two years. Even though the buyers often tend to ignore the contestability period while signing the policy papers, it significantly impacts the beneficiary claims that are made before the completion of this period. Read through the page to know about some of the vital aspects of this clause.

What is the contestability period in life insurance?

The contestability period is a clause in a life insurance policy according to which if the policyholder expires within two years of purchasing the policy, the insurance company can contest or question the claim raised by his/her beneficiaries. In such cases, the insurer will have the right to ask for verification of the personal details of the buyer. This clause enables the insurers to deny or cancel a claim made before the completion of two years from the policy date. In certain cases, they even have the right to withhold parts or the entire benefit payment from the beneficiaries. Some companies also have a clause according to which if the policyholder commits suicide within two years from the policy issuance date the beneficiaries cannot claim the death benefit. They will straightforwardly deny if any claims are made in similar instances.

How the customers usually breach the contract?

There are various ways how customers usually breach the contract. Lying about one’s medical condition, past health status, dangerous job profile, unhealthy habits, drug abuse, and other addictions are considered as discrepancies. Here is an example to help you understand it better.

Example -

Suppose you are a chain smoker or addicted towards alcohol but while buying your life insurance policy you falsely represented that you don’t smoke or drink. Now, unfortunately, if you die within 2 years of purchasing the policy, the company will have the right to investigate your past in order to verify the authenticity of the information provided by you at the time of policy purchase. In case you are found to be guilty of providing wrong information the company will have the authority to deny the insurance amount claimed by your family members/beneficiaries.

What is the significance of the contestability period?

The insurance companies often come across cases where the buyers provide inaccurate or false personal information about their lifestyle, health, and job nature with an intent to mislead the insurers. Since the cost of premiums of a life insurance is based on the age and the medical history of the insured, there is a high possibility that the customers in order to reduce the cost of the premium, may tend to give false or inaccurate information regarding their health and lifestyle. Hiding hazardous occupation, unhealthy habits, drug abuse or addictions, risky hobbies, etc. are some of the areas where a customer can possibly lie to mislead the insurers and thereby, reducing the premium rate. This is where the clause of contestability comes into play.

The main purpose of including this clause in the life insurance policy documents is to protect the companies against fraud claims. It allows the insurer to evaluate and investigate the medical history of the customer and find out the credibility of the information provided at the time of insurance policy purchase. In this way, it not only safeguards the insurers against discrepancies but also gives them a fair chance to question the authenticity of a policy claim.

How is a claim contested by the insurance companies?

While contesting a claim the insurance company at first investigates the authenticity of the claim by checking the medical history and other personal documents of the customer. In the process, if the company gets hold of any evidence that proves misrepresentation or breaching of contract by the insured, it can deny or cancel the claim. There is no fixed time of investigation and it can vary according to the circumstances. While some investigations may take a few days others can linger up to weeks or months.

What can happen if the company contests a claim?

Misleading the insurer by providing inaccurate information is a matter of breaching and in such cases the company holds the right to check the authenticity of the insurance claim. Such contested claims are usually settled by the insurance companies in the following ways:

  • In case of authentic claims

If the information provided by the policyholder in the application form is found to be true, the insurance company approves the claim while also giving interest along with the total payout to compensate the delay caused due to the contestation process.

  • In case of information breach

    • The insurer usually pays the death benefit to the beneficiaries after deducting the additional premiums that would have been charged if the actual information was provided at the time of purchase. For instance, in case of a smoker or an alcoholic, the extra amount that he/she would have actually paid as premiums will be deducted from the total amount of death benefit.
    • Alternately, in certain cases the company can completely deny the claim and give the premiums back to the beneficiaries. However, the insurance companies take such strict actions only in cases where the new information gathered about the policy holder’s medical history, health, job nature, etc. are beyond the coverage of the policy.

What are the changes that take place after the contestability period?

Here are the changes that ideally take place in a life insurance policy after the contestability period is over:

  • After the completion of the contestability period, a life insurance policy becomes incontestable. This means the beneficiary will receive the entire coverage amount as long as the policy is in effect. However, in some policies, there might be certain exclusions where the beneficiaries don’t get paid.
  • If the coverage of your life insurance policy lapses, the new contestability period will start only when you reinstate or purchase a new life insurance policy. While buying the new policy make sure to provide only correct information to avoid future hassles.

Vital points to know about the life insurance contestability period

Some very important points that you should know about the contestability period of your life insurance policy are as follows:

  • Being untruthful on your life insurance application form for getting premiums at lower rates can be dangerous for your loved ones after your death. If you lie on the life insurance application form thinking that you will be able to live through the contestability period, it can lead to denial or cancellation of the policy claim after your death. Since you are taking the policy to secure the future of your family members when you will be no more to take care of their financial needs, make sure that no information provided on the application form is false or inaccurate.
  • Even though the insurance companies have the right to investigate and verify any claim made during the contestability period, they still will have to pay the death benefits to the policyholders’ family if the accuracy of the information is proved.
  • If you die during the contestability period, your family might have to wait to get the money for quite a long time until the company investigates the matter and is satisfied with the outcome.

Now that you know everything about the life insurance contestability clause, make sure to furnish only the correct information about your health and medical status while you are buying a life insurance policy. Remember, honesty is the key to get through the life insurance contestability period clause. If you are honest at the time of purchasing the policy your family will get the money even if you die after one hour of buying the insurance cover.

Contestability Period in Life Insurance Reviews

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  • Bajaj Allianz Life Life Insurance
    "Safe plan for future"
    0.5 5.0/5 "Blown Away!"
    I have life insurance with Bajaj Allianz, I used to pay Rs. 12,000 for one year policy, it has the tenure of 40 years, Its a totally term plan for the value of 1 crore, they give lump sump amount to the nominees, the claim ratio is good and also terminal waiver on premium.
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    , pune
    Reviewed on Dec 14, 2018
  • SBI Life Life Insurance
    "Best ULIP Policy"
    0.5 5.0/5 "Blown Away!"
    I have purchased a market based policy 2 years ago. I have chosen SBI LIFE because it was suggested by my friend. I pay the premium amount of Rs. 10000. I make the premium through online. The growth was pretty good and tenure period of the policy is 10 years.
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    , bangalore
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  • LIC Life Insurance
    "Best policy in LIC"
    0.5 5.0/5 "Blown Away!"
    My money back policy was taken with LIFE INSURANCE OF INDIA. I pay the premium amount of Rs. 5000 in a month. I have selected LIC because of the returns. I make the premium through ECS. Total tenure period of the policy is 25 years. My friend has referred me about this policy
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    , bangalore
    Reviewed on Dec 14, 2018
  • LIC Life Insurance
    "Good LIC policy"
    0.5 5.0/5 "Blown Away!"
    I'm just paying the premium and i have never get the sum assured amount and i will get it after 25 years of tenure period. I'm making the premium through ECS. I pay the premium amount of Rs. 5000 every month. I will get a coverage value of Rs. 1.27 Cr.
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    , bangalore
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  • Bharti Axa Life Life Insurance
    "Best Policy"
    0.5 5.0/5 "Blown Away!"
    I have taken life insurance from the Bharti Axa life as it has good returns i make the payment through on-line banking annually . This policy covers accidental and critical illness benefits with the tenure period of 15 years . Overall am satisfied with my policy .
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    , faridabad
    Reviewed on Dec 14, 2018
  • LIC Life Insurance
    "Useful policy"
    0.5 4.0/5 "Great!"
    In the month of February, i have purchased a money back policy from Life Insurance corporation of India. I pay the premium amount of Rs. 15000. Last time i have paid the payment through cheque and in future i make through online. One of sister who is working as a LIC agent has referred this policy.
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    , bangalore
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  • LIC Life Insurance
    "Useful policy"
    0.5 4.0/5 "Great!"
    I have purchased a term insurance policy 1.5 years back. There is no particular reason for choosing the LIC. I pay the premium amount of Rs. 26000 and i have chosen the annual payment mode. Sum assured amount was Rs. 70 lakhs. Total tenure period of the policy upto 70 years of my age.
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    , bangalore
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  • LIC Life Insurance
    "Average Policy"
    0.5 3.0/5 "Satisfactory"
    I have a life insurance policy with LIC from last 4 years and it is a long term policy. I pay my premium once in 6 months through direct payment and i am convenient with the payment options. Tenure period for this policy is 18-20 years. The returns and benefits are good in this policy.
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    , ghaziabad
    Reviewed on Dec 14, 2018
  • LIC Life Insurance
    "GOOD SERVICE"
    0.5 5.0/5 "Blown Away!"
    I have purchased the life insurance policy with the LIFE INSURANCE CORPORATION OF INDIA where the name of the policy is ENDOWMENT PLAN and i am using it from past 10 years. The maturity period of this policy is till 67 years of my age. This gives the policy coverage of 4 lakhs.
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    , bangalore
    Reviewed on Dec 14, 2018
  • LIC Life Insurance
    "Good Policy with Life Coverage"
    0.5 5.0/5 "Blown Away!"
    I have agent who coordinate with me for my life insurance, they are responding well, the customer support is good, they have different payment options. The policy name called Jeevan labh its for 15 years I get the benefits as lump sum amount with life cover.
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    , bangalore
    Reviewed on Dec 13, 2018
  • LIC Life Insurance
    "Good service"
    0.5 4.0/5 "Great!"
    I have been using my life insurance with Life insurance corporation of India,the agent had clearly explain me about the policy coverage, plan benefits etc, there premium amount they have charged me was nominal,they charged in quarterly basis,overall service is good.
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    , hyderabad
    Reviewed on Dec 13, 2018
  • HDFC Life Life Insurance
    "Fine policy for emergency purpose"
    0.5 5.0/5 "Blown Away!"
    Along with my personal loan they have provided me a life insurance policy from HDFC LIFE. I have to pay the premium amount of Rs. 6000 in a year. I used to pay the premium through online. Total tenure period of the policy is 4 years. I'm getting a sum assured amount of Rs. 3 lakhs.
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    , gurgaon
    Reviewed on Dec 13, 2018
  • SBI Life Life Insurance
    "Best Policy"
    0.5 5.0/5 "Blown Away!"
    I took this Life insurance from Sbi life mainly because of the good returns. The payment am doing through online every year through online payments . The best about the policy is it covers accidental coverage and critical illness There customer service and customer response is also good.
    Was this review helpful? 0
    , bangalore
    Reviewed on Dec 13, 2018
  • LIC Life Insurance
    "Best Policy"
    0.5 5.0/5 "Blown Away!"
    Based on the benefits and returns i have chosen this life insurance corporation of India . I am satisfied with the amount which am making for the policy . Am making the payment yearly through online . This policy cover accidental benefits . Overall am happy with it.
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    , faridabad
    Reviewed on Dec 13, 2018
  • LIC Life Insurance
    "Good policy"
    0.5 4.0/5 "Great!"
    I have purchased a life insurance policy in my wife's name. 5 years back i have bought the Jeevan saral policy with Life Insurance Corporation of India. Since its a better company, i have selected the LIC. I pay the premium amount of Rs. 5400. Its a long term policy. I have selected the annual payment mode.
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    , mumbai
    Reviewed on Dec 13, 2018
  • LIC Life Insurance
    "Best Service"
    0.5 5.0/5 "Blown Away!"
    I am using LIC using thee policies same policies life insurance coverage and two more different policies i am never contact customer Service for everything contact with agent only Responsiveness very good , Promised Interest Rate is less in LIC but trust worthy , Fees & Charges is use to pay by agent only. Hence i can give rating 5 for best service
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    , ahmedabad
    Reviewed on Dec 13, 2018
  • IDBI Federal Life Insurance
    "Very Good"
    0.5 4.5/5 "Excellent!"
    IDBI Life cover policy for my children there is more benefits in this policy i have to pay 30k every year after his age of 16 partially amount will received for his education after few years for marriage and in risk factor also amount will provide once terms will complete total Amount will be received in 3 terms for this policy.
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    , hyderabad
    Reviewed on Dec 13, 2018
  • LIC Life Insurance
    "Very good"
    0.5 4.5/5 "Excellent!"
    I am using Life Insurance policy and need payment in six month once i am happy with LIC insurance policy . Since long time i am using Life cover policy so i am only trust to LIC for Life insurance payment is made in cheque and sometimes in cash which one collected by agent for service i can give rating 4.5 very good service.
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    , hyderabad
    Reviewed on Dec 13, 2018
  • HDFC Life Life Insurance
    "Every salary holder must taken this policy"
    0.5 4.0/5 "Great!"
    I have purchased the HDFC accidental policy nearly 4 years before. I have been paying the premium amount of Rs. 80000. I used to make the premium through my credit card and i covert into EMI basis. This is annual payment mode policy. This policy has coverage value of Rs. 15 lakhs and all my member covered in this policy
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    , kolkata
    Reviewed on Dec 13, 2018
  • LIC Life Insurance
    "Good policy in LIC"
    0.5 4.5/5 "Excellent!"
    Since its a Government undertaken i have selected Life Insurance corporation of India for my life insurance policy. One of my agent who referred me about the Jeevan Anand policy. I had purchased this policy in 2013. I used to make the premium amount of Rs. 30000 and i have selected the yearly payment mode. The policy will get over by 2033.
    Was this review helpful? 0
    , kolkata
    Reviewed on Dec 13, 2018
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