Legal Definitions - non-contestability clause

A non-contestability clause is a standard provision found in many insurance policies, particularly life, disability, and long-term care insurance. It establishes a specific time frame, typically one or two years from the policy's issue date, during which the insurance company can investigate and challenge the accuracy of statements made by the policyholder in their application.

Once this non-contestability period has passed, the insurance company generally loses its right to deny a claim or cancel the policy based on errors, misrepresentations, or even fraudulent statements made in the original application. The primary purpose of this clause is to provide policyholders and their beneficiaries with certainty that their coverage will not be retroactively invalidated years later due to an oversight or misstatement made when applying for the policy.

Examples:

• Life Insurance and Health History: Sarah applied for a life insurance policy and, in her application, stated that she had never been treated for high blood pressure. The policy included a two-year non-contestability clause. Two and a half years after the policy was issued, Sarah passed away due to complications from a pre-existing heart condition. During the claim process, the insurance company discovered medical records showing she had, in fact, been treated for high blood pressure five years before applying for the policy. Because the two-year non-contestability period had already expired, the insurance company could not deny the death benefit to Sarah's beneficiaries, even though there was an inaccuracy in her initial application.

• Disability Insurance and Income Reporting: Mark, a self-employed consultant, applied for a disability insurance policy. To qualify for a higher monthly benefit, he slightly overstated his average annual income on the application. His policy contained a one-year non-contestability clause. Fifteen months after his policy began, Mark suffered a severe injury that left him permanently disabled and unable to work. When he filed a claim, the insurance company reviewed his financial records and discovered the discrepancy in his reported income. However, because the one-year non-contestability period had passed, the insurer was legally obligated to pay Mark his full disability benefits as outlined in the policy, despite the initial misrepresentation of his income.

• Long-Term Care Insurance and Past Medical Procedures: Eleanor applied for a long-term care insurance policy, and in filling out the extensive medical questionnaire, she inadvertently forgot to list a minor outpatient surgical procedure she had undergone ten years prior. Her policy included a two-year non-contestability clause. Three years after the policy was issued, Eleanor required extensive long-term care services due to a progressive neurological condition. When her family filed a claim, the insurance company's review uncovered the omitted procedure. Due to the non-contestability clause, which had already passed its two-year term, the insurance company could not deny coverage for Eleanor's long-term care expenses based on the forgotten medical detail in her original application.