What An Incontestability Clause Means For Your Disability Insurance Claim

An incontestability clause prevents insurance companies from canceling your disability insurance policy after a certain period unless you’ve committed fraud. Understanding this clause can save you from future headaches and give you peace of mind. In the following sections, we’ll explain how this clause works, why it’s important, and what you need to look for. Stick around to learn how this small but powerful feature works.

Understanding Incontestability Clauses In Disability Insurance Policies

The incontestability clause in disability insurance policies is crucial in providing protection and security to policyholders. This clause essentially states that the insurance company cannot contest the policy’s validity for any reason other than non-payment of premiums after a certain period of time from the policy’s effective date.

Definition of the Incontestability Clause

The incontestability clause protects policyholders by ensuring that, once the specified time period has passed, the insurance company cannot deny a claim or cancel the policy based on discrepancies or omissions in the original application. This clause gives policyholders a sense of stability, knowing that their coverage will remain intact as long as they pay their premiums.

Why Underwriting Happens Before Issuing a Policy

You might wonder why insurers are so diligent about reviewing your application before handing over a disability insurance policy. The answer lies at the heart of the incontestability clause itself.

Insurance companies are required to “do their homework” up front—meaning, they must carefully review and assess risk before agreeing to issue a policy, not after someone files a claim. This prevents them from combing through old applications looking for mistakes or minor omissions years down the road, just to avoid paying out on valid claims. Once the contestability period has passed, insurers generally cannot challenge the policy due to errors or incomplete information in your original application (unless there was outright fraud).

In short, these rules encourage insurers to make fair and thorough decisions from the start and help shield policyholders from losing coverage when they need it most.

Importance of the Incontestability Clause

The incontestability clause protects policyholders by ensuring that once a disability insurance policy has been in force for a certain period of time, typically two years, the insurance company cannot deny a claim based on inaccuracies or omissions in the application. This protection gives individuals peace of mind that their coverage will remain intact when they need it most.

Most states require the inclusion of such clauses in insurance policies. For example, Florida has Statute § 627.455, which states:

“Every insurance contract shall provide that the policy shall be incontestable after it has been in force during the lifetime of the insured for a period of 2 years from its date of issue except for nonpayment of premiums and except, at the option of the insurer, as to provisions relative to benefits in event of disability and as to provisions which grant additional insurance specifically against death by accident or accidental means.”

Limits and Exceptions of the Incontestability Clause

While the incontestability clause provides valuable protection, there are limitations and exceptions to be aware of. One common exception is when the policyholder commits fraud or provides false information during the application process. In such cases, the insurance company reserves the right to dispute the validity of the policy, even after the incontestability period has expired. In addition, the insurance company may contest the claim if there is clear evidence of intentional misrepresentation or withholding of material information that could have influenced the policy’s issuance.

What Counts as a Fraudulent Misstatement?

It’s important to understand that the incontestability clause does not give you free rein to be less than truthful on your insurance application. If you knowingly provide false information with the intent to deceive—for example, hiding a recent diagnosis or misstating key details about your medical history—this can be considered a fraudulent misstatement. In these cases, the insurance company has grounds to cancel the policy, even after the incontestability period has ended.

The key factor is intent. Forgetting to mention a minor, unrelated health concern likely won’t be considered fraud after the two-year mark. But intentionally withholding major details, like a serious illness you were diagnosed with right before applying, is another story. Ultimately, whether something rises to the level of fraud is a question for a judge or jury to decide, based on all the facts and evidence.

For example, in a case by the name of Dormer v. Northwestern Mutual Life Insurance Company, the court concluded that the disability claimant’s failure to fully disclose her history of chronic fatigue syndrome, Bell’s palsy, and back pain when applying for disability insurance constituted an intentional and material misrepresentation and permitted the insurance company to rescind her disability policies and not pay her any disability benefits. Policyholders must be transparent and truthful when applying for disability insurance to avoid any potential future disputes related to the incontestability clause.

Can Insurance Companies Cancel a Policy After the Incontestability Period?

Once the incontestability period—typically two years—has passed, insurance companies generally cannot cancel your policy or deny a claim based on inaccuracies or mistakes found in your original application. This is a core reason why the incontestability clause offers such valuable peace of mind to policyholders.

However, there are important exceptions to keep in mind. The insurer still holds the right to rescind a policy or deny a claim if they discover evidence of intentional fraud. It’s not enough for there to be a simple mistake or an honest oversight; the misstatement must be knowingly false and made with the intent to deceive the insurer. For example, if someone knowingly omits the diagnosis of a significant medical condition when applying for coverage—hoping to avoid higher premiums or denial of insurance—the insurer may later cancel the policy if that deception comes to light, even after the incontestability period has ended.

On the other hand, minor mistakes or forgotten details that aren’t material to the policy are unlikely to lead to cancellation after the incontestability period. This is why it’s crucial to be as forthcoming and accurate as possible when filling out insurance applications. Full disclosure protects you from future disruptions to your coverage and ensures your policy stands when you need it most.

Material vs. Non-Material Misstatements After the Incontestability Period

A common question from policyholders is whether it makes a difference if a misstatement on an insurance application is considered “material” or “non-material” once the incontestability period has passed. Generally, after the incontestability window has closed, insurers cannot cancel your policy or deny a claim—even if they later discover an error or omission that isn’t directly related to your claim or benefits.

However, there are critical distinctions to keep in mind:

• Material Misstatements: If a misstatement or omission involved information that would have influenced the insurance company’s decision to offer you coverage, or would have resulted in significantly different policy terms, it’s more likely to be scrutinized even after the incontestability period—especially if there is evidence of intentional fraud or misrepresentation.
• Non-Material Misstatements: Errors or omissions that wouldn’t have changed the insurer’s decision generally do not put your coverage at risk after the incontestability period ends. For example, leaving out a minor detail that would not have affected your insurability typically cannot be held against you after this timeframe.

It’s important to note that, regardless of the nature of the misstatement, if fraud is suspected, insurers may still have legal grounds to void the policy. Always provide complete and accurate information when applying for disability insurance to ensure your rights remain protected.

How Courts Assess Intent to Deceive

When a misstatement or omission is discovered in a disability insurance application, courts do not simply take the insurer or policyholder at their word. Instead, determining whether the applicant intentionally tried to deceive the insurance company becomes a central question. This is rarely a simple, black-and-white issue.

Courts typically look for evidence of deliberate wrongdoing—asking whether the policyholder knowingly withheld or falsified information that would have influenced the insurer’s decision to issue the policy. For example, leaving out a newly diagnosed serious illness is likely to be viewed as intentional, especially if the timing or severity was significant and recent. On the other hand, genuinely forgetting to mention a minor, longstanding medical issue is less likely to be seen as an attempt to mislead.

Ultimately, the assessment of intent is a factual matter. Judges or juries evaluate all available evidence, including the circumstances surrounding the omission, the applicant’s medical records, and the nature of the undisclosed condition. Their goal is to determine whether the omission was an honest mistake or a purposeful act designed to obtain coverage under false pretenses.

Effect on Employer-Sponsored Life Insurance Coverage

The incontestability clause also extends important protections to those covered under employer-sponsored life insurance plans. Typically, when enrolling in such coverage—especially if joining after the initial eligibility period or seeking increased benefits—employees may be required to submit an “evidence of insurability” form to demonstrate good health. However, it’s not uncommon for these forms to be overlooked or for the process to be incomplete.

If coverage has been in place for more than two years, the incontestability clause often prevents the insurer from denying eligibility or contesting the validity of coverage based solely on missing evidence of insurability. This means that, even if the administrative requirements weren’t fully met at the outset, as long as premiums have been paid and no fraud occurred, employees can gain added reassurance that their life insurance protection will not be challenged after the incontestability period has elapsed.

Benefits of an Incontestability Clause

Imagine the peace of mind that comes from knowing that your disability insurance coverage is secure and that your insurer cannot arbitrarily challenge it. This sense of security is one of the primary benefits of an incontestability clause for policyholders. By including this clause in your policy, you protect yourself from unexpected challenges to the validity of your coverage, providing you with a layer of protection that ensures your policy remains intact when you need it most.

Protection for Policyholders

The incontestability clause protects policyholders by assuring them that their coverage cannot be challenged based on undisclosed information or technicalities after a certain period of time. This provision provides a level of security and reliability that gives policyholders confidence that their coverage will remain in effect as long as they pay their premiums. It acts as a safety net and fosters trust between the insurer and the insured.

Legal Standing of the Clause

An incontestability clause can significantly benefit policyholders in the event of a dispute or claim denial. This clause provides a clear legal basis, reinforcing the validity of the policy and protecting the policyholder’s rights.

In the event of a disagreement between the insurer and the insured regarding the terms of the policy, the incontestability clause can serve as a critical measure to prevent unjustified claim denials or unilateral changes in coverage. It puts the policyholder on firmer ground when coverage is challenged and provides an invaluable level of protection when navigating complex insurance issues.

By including an incontestability clause in your disability insurance policy, you secure coverage and establish a foundation of trust and reliability to protect your interests in the face of unforeseen challenges or disputes.

Steps to Take If Your Coverage Is Challenged After the Incontestability Period

If you find yourself facing a challenge to your insurance coverage after the incontestability period, it’s important to act quickly and protect your rights. Start by thoroughly reviewing your policy to understand what protections the incontestability clause provides in your specific situation. Gather all relevant documents, correspondence, and any notes about your policy and any communications with your insurer.

Next, consult with an attorney who has experience handling insurance disputes, especially those involving incontestability clauses. An experienced legal professional can help you determine your options, assess the strength of your case, and advocate for you in communications or potential legal proceedings with the insurance company. By taking swift action and seeking knowledgeable support, you increase your chances of preserving your coverage and securing the benefits you deserve.

Contact a National Long-Term Disability Attorney Today

If you are facing a long-term disability claim denial, contact the experienced legal team at the Ortiz Law Firm. Our dedicated professionals are here to help you secure the benefits and protection you deserve. Call (888) 321-8131 for a free case review.