What is an insurance policy s incontestability provision?
Virtually all insurance policies have an incontestability provision, which gives the insurer two years (one year in several states) from the date of the application to discover any incorrect information, error, or even fraud in the application and use that information to contest payment of a claim. After two years, the policy becomes incontestable. One key exception to the incontestability provision concerns a misstatement of age. Although age is a primary factor in establishing a policyholder s life expectancy and premiums, an insurer is not allowed to cancel a policy if the policyholder s age is misstated. Instead, the insurer may adjust the face amount of the policy to whatever amount the stated premiums would buy for a person of the insured s real age. The policy wouldn t be canceled, but its face value would likely be lowered.
