Incontestability clause

An incontestability clause limits how long a life insurer can challenge the validity of a policy based on what the applicant said, or left out, on the life insurance application. State law requires the clause in individual life policies, and the period is almost always two years from the issue date. During those two years, the contestability period, the insurer can investigate a claim and rescind the policy if it finds a material misrepresentation, usually refunding the premiums.

Once the policy has been in force for two years while the insured was alive, the insurer generally must pay even if the application contained errors. Say, hypothetically, an insured failed to disclose a past diagnosis and died 30 months after issue: in most states the claim would be paid. A death within the first two years is likely to prompt a medical records review, which is one reason early claims take longer.

The clause has limits. It doesn't override the misstatement of age clause, which adjusts the benefit rather than voiding the policy, and some states let insurers contest fraudulent applications even after two years. A reinstated policy can start a new contestable period for statements made in the reinstatement application. See the two-year contestability period and what happens if you lie on a life insurance application.