The Contestability Period in Life Insurance Policies
When you purchase a life insurance policy, you expect that your loved ones will receive the promised benefits when you pass away. However, many insureds and beneficiaries are surprised to learn that even valid claims can be denied if the insured dies within a certain timeframe after the policy is issued. This timeframe is known as the contestability period, and it gives the insurer the right to investigate the policy and, in some cases, challenge or void it altogether.
Understanding what the contestability period is, how it works, and what problems can arise during this time can help protect both policyholders and beneficiaries from unnecessary claim disputes. If you believe a life insurance claim has been unfairly denied in violation of California law, contact Gianelli & Morris to speak with our California insurance bad faith attorneys.
What Is the Contestability Period?
In California, every life insurance policy includes a two-year contestability period. It begins on the date the policy goes into effect and ends when the insured dies. For any claim arising from an insured’s death occurring in that two-year period, the insurance company can review and challenge a claim based on information provided in the insurance application.
The insurer has the right to investigate whether the applicant made any material misrepresentations or omissions on the insurance application. If the insurer finds evidence that the applicant provided false or incomplete information, whether intentionally or by mistake, it can use that information as a basis to deny payment of the death benefit.
However, the false information must be material. This means the insurer must show that, had it known about the misstated information, it would have declined to issue the policy or issue it on different terms (e.g., charged a higher premium).
Once the two-year period expires, the insurer loses this right. After the contestability period, the policy becomes “incontestable,” meaning the insurer must pay the claim except in cases of extreme fraud, such as intentionally falsifying the insured’s identity or faking a death.
How the Contestability Period Affects Claim Approvals
When a claim for life insurance benefits is filed for a death that occurs within the contestability period, insurers perform a “contestable investigation” to see if they can rescind the policy based on a material misrepresentation in the application for insurance. This process can include:
- Requesting the deceased’s full medical records
- Reviewing the insurance application and comparing it to the medical history
- Requesting prescription drug history through a national database
- Interviewing doctors, employers, or family members
- Looking for inconsistencies in lifestyle disclosures (for example, tobacco or alcohol use)
It is not uncommon for insurers to seize on minor discrepancies in the insured’s medical history to justify a denial. For example, if an applicant forgot to mention a past prescription for blood pressure medication or an old hospital visit, the insurer might claim that the omission was “material,” meaning it influenced its decision on how much premium to charge, and use that omission as a reason to deny the claim.
Common Reasons for Contestability Disputes
Many contestable claim denials arise from routine mistakes or misunderstandings rather than an actual misrepresentation. Some of the most common issues include:
1. Medical History Errors
Applicants might unintentionally omit medical conditions, especially if they believe the issue was minor, resolved, or occurred long ago. Insurers sometimes take advantage of these omissions by claiming they were material misrepresentations.
2. Lifestyle Misrepresentations
Applications often ask about smoking, alcohol consumption, or high-risk activities such as skydiving or scuba diving. Even infrequent or occasional habits can lead to disputes if the insurer interprets the applicant’s answers too narrowly.
3. Employment or Income Misstatements
Life insurance applications frequently ask for occupation and income information. If the insurer claims that the applicant’s stated job duties or income level were inaccurate, it may argue that it would not have issued the policy or would have charged higher premiums had it known the truth.
4. Medical Record Discrepancies
Sometimes, errors originate not with the applicant but with medical records. A doctor’s note or outdated chart entry may list a condition incorrectly, leading the insurer to claim the applicant concealed a diagnosis they never knew about.
In each of these cases, the insurer’s ability to contest the claim gives it leverage to delay or deny payment, forcing beneficiaries to provide extensive documentation or even file a lawsuit to enforce the policy.
The Difference Between Misrepresentation and Fraud
It’s important to understand that not every error on an application amounts to fraud. Fraud requires intent, i.e., the deliberate concealment or falsification of information to mislead the insurer. Misrepresentation, on the other hand, may involve an innocent mistake or omission.
Under California law, an insurer can deny a claim based on a material misrepresentation even if it was not made intentionally. However, courts often look closely at whether the information was truly material and whether the insurer would have issued the policy or charged a higher premium had it known the truth. In many cases, insurers stretch the definition of materiality to avoid paying legitimate claims.
Experienced insurance law attorneys can challenge these denials by showing that the alleged misrepresentation had no real impact on the underwriting process or the risk assumed by the insurer.
When Contestability Investigations Cross the Line to Bad Faith
While insurers have the right to investigate contestable claims, they also have a duty to do so in good faith. Problems arise when insurers use the contestability clause as a pretext to delay or deny payment unfairly.
Some bad faith tactics include:
- Conducting endless investigations without a clear justification
- Using unrelated or outdated medical information to deny coverage
- Claiming minor omissions were material when they clearly were not
- Ignoring evidence that supports the validity of the claim
- Failing to communicate clearly with beneficiaries or respond to inquiries
In California, when an insurer denies a contestable claim without a reasonable basis, the denial may constitute insurance bad faith, entitling beneficiaries to additional damages beyond the policy benefits, including both compensatory and punitive damages.
What Beneficiaries Can Do
If a contestable life insurance claim is denied, beneficiaries should act promptly. The first step is to request the insurer’s complete claim file to see what evidence the company relied on to justify the denial. Reviewing the claim file can reveal inconsistencies, errors, or misinterpretations that can be used in an appeal or lawsuit.
Beneficiaries should also gather all available documentation, such as medical records, application copies, and correspondence with the insurer, and consult an attorney experienced in life insurance law. An attorney can help determine whether the denial was justified or whether the insurer acted in bad faith.
Many denials can be overturned through skilled negotiation or by demonstrating that the alleged misrepresentation was immaterial or unintentional.
Protecting Your Rights in California Life Insurance Claims
At Gianelli & Morris, we represent life insurance beneficiaries whose contestable life claims have been unfairly denied. Our firm holds insurers accountable when they misuse the process or act in bad faith, ensuring policyholders’ promises are honored and beneficiaries receive the protection their loved ones intended.
If your contestable life insurance claim has been denied, contact Gianelli & Morris for a free consultation. We can review your case, challenge improper denials, and help you recover the benefits you deserve under California law.
