What is the law about material misrepresentation during first 2 years of a life insurance policy?What is the law about material misrepresentation during first 2 years of a life insurance policy?
Suppose an client material misrepresentation about a diabetes issues when applying for life ins. In an event that the client dies during the first 2 years of the policy from an unrelated issue,( for instance a car accident). Would the policy be contestable by the ins. company?
p.s. please provide sources if avail. thank you
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mbrcatz 1:03 pm on March 20, 2010 Permalink
I think you’re mixing terms. Material misrepresentation is grounds to cancel or revoke a policy, depending on the state.
For life insurance, there’s a 2 year contestable period (three years, in a few states) – where if the person dies within the first two years, the life insurance company can investigate to determine if there was a misrepresentation on the application – and if there was, accidental or deliberate, they don’t have to pay the death claim. The misrepresentation does NOT have to be related to the death of the insured.
Yes, the policy is contestable. Yes, the insurance company doesn’t have to pay, if there is an UNRELATED death, during the contestable period.
Your source, is the policy form.
ani 1:03 pm on March 20, 2010 Permalink
As per law if death happened by accident the amount (death claim) is payable irrespective of number of year policy runs provided the policy should be in full force(up to date premium paid).
If death is happened because preexisting illness for the first 2 years it is the duty of the policyholders relative to prove there was no such illness. If the claim to repudated due to illness.
as per section 45 of insurance act given below.
Policy not to be called in question on ground of mis- statement after two years. No policy of life insurance effected before the commencement of this Act shall after the expiry of two years from the date of commencement of this Act and no policy of life insurance effected after the coming into force of this Act shall, after the expiry of two years from the date on which it was effected, be called in question by an insurer on the ground that a statement made in the proposal for insurance or in any report of a medical officer, or referee, or friend of the insured, or in any other document leading to the issue of the policy, was inaccurate or false, unless the insurer shows that such statement 2[ was on a material matter or suppressed facts which it was material to disclose and that it was fraudulently made] by the policy- holder and that the policy- holder knew at the time of making it that the statement was false 3[ or that it suppressed facts which it was material to disclose]:
John 1:03 pm on March 20, 2010 Permalink
The form that most Life Insurance policies take are regulated by the National Association of Insurance Commissioners and can be best explained this way; After a period of two years a Material Misrepresentation which may have affected the policy at issue will no longer have power to affect the payment of any claim for which the policy is intended to cover.
This incontestability clause means the policy remains in force as long as you pay the premium after a period of two years.
Rajinder 1:03 pm on March 20, 2010 Permalink
No In case of death from car accident it can not be said to be misrepresentation.
sai krishna 1:03 pm on March 20, 2010 Permalink
It all depends upon the post mortem report of the diseased. If the death is due to accident , the claim can be given provided the insurer has covered for the accident benefit . If in the post mortem report , any disease has been highlighted , which has not been disclosed in at the time of issue of policy , then the paymwnt will not be done