Contestability Period

Life Insurance Contestability Period Suicide Exclusion

What happens if you buy a life insurance policy and you die within the first two years?

Known as the "contestability period" the first two years after a policy is sold, the insurance company can investigate the cause of death and deny your claim if they prove that you lied on the application about your health status.

If you die by suicide during this period, they will return the premiums paid, but the company will not pay the death claim. This is not a good result. The issue gets even harrier if the insureds replaced an existing policy on the advisor's recommendation. This happened to me last year.

I share this story about the company doing the right thing by their policy holders. In my case, they investigated and determined the cause of death was natural. Out of curiosity, I called the carrier to ask what would they have done if there was a suicide? Much to my surprise, since this case was a second to die policy, they would not void the coverage and return the premium. They said as long as the second insured (the spouse) lived to normal life expectancy, they would pay the entire claim, ignoring the cause of first death.

We should recognize insurance companies when they do the right thing.