What is a Contestability Clause?
A contestability clause is a part of an insurance policy that allows the insurance company to challenge a claim within a certain period, usually two years after the policy is issued. During this time, the insurance company can investigate and contest the claim if they believe that there is a mistake, misrepresentation, or fraud involved in the policy application. This period is often used by insurers to ensure that they are not liable for fraudulent or inaccurate claims. After the contestability period ends, the insurance company can no longer challenge the claim based on anything that was disclosed or not disclosed at the time the policy was issued. For you as a beneficiary, this means that if the policyholder passed away within the contestability period, the insurance company may decide to investigate and, potentially, deny your claim. It’s important to understand that while this clause exists, it’s not an automatic denial. You do have legal rights, and with the right legal guidance, you can challenge any unfair decisions made by the insurance company.Why Are Contestability Clauses Important to You?
Understanding contestability clauses is crucial because, as a beneficiary, they could directly affect the outcome of your claim. If you find yourself in the unfortunate position of having to deal with a contested claim, this clause can serve as the foundation for your case. The insurance company might claim that they were misled or that certain information wasn’t disclosed correctly, which could lead to them denying the payout. For instance, if the insured person did not fully disclose medical history or if there were discrepancies in their application, the insurance company might argue that it has the right to contest the claim. This could leave you in a difficult financial situation, especially if the money from the life insurance policy was intended to cover funeral expenses, pay off debts, or support loved ones left behind.
What to Do if Your Claim is Contested
If the insurance company contests your claim, it’s essential to act quickly and carefully. The first step is to thoroughly review the policy and the specific terms and conditions, including the contestability clause. The insurer should provide a clear explanation as to why they are contesting the claim. If you receive a letter from the insurer denying your claim, they must specify the reasons for the denial, and you should carefully examine those reasons to determine if they are valid. Once you understand why your claim is being contested, the next step is to gather any supporting documents that can prove the validity of the claim. This could include medical records, statements from healthcare providers, or other evidence that contradicts the insurer’s reason for contesting the claim. Having a clear and organized collection of evidence will be critical in building your case. It is also wise to consult with an attorney who is familiar with insurance law and contestability clauses. An attorney will be able to review the circumstances surrounding your claim, identify whether the insurer’s action is legally justified, and help you navigate the complexities of fighting a contested claim. Legal representation can help ensure that your rights are protected throughout the process.
We contacted Trief & Olk to help us with a life insurance issue and Shelly Friedland was the attorney assigned to our case. Before Shelly took our case she explained to us that the likelihood of our success without going to court was possible but not likely. Unfortunately we did not get the outcome we had hoped for but it was our decision to not move forward and have our case litigated. Shelly is very knowledgeable and was very straight-forward in her assessment of our case as we moved forward. She was very patient and thorough in answering our questions. She always responded in a timely manner and listened to our concerns. We would certainly recommend Shelly and would use her firm again in the future.”
- John Ramig
If there is any possibility of winning your life insurance case – this is the place to do it for you. They are efficient, honest and will achieve the best possible outcome.
Shelly Friedland worked on my case where a life insurance policy had lapsed and was even a few days beyond the grace period. Farmers had rejected my claim twice and was unwilling to take a second look. Shelly was able to get them to pay the entire claim without going to court, and the full amount was deposited in my account within a couple months. Highest recommendation.”
- Kathleen Brown
Trief & Olk is a superior law firm. Their attorneys and other legal professionals have a brilliant understanding of the law and the litigation process. They diligently perform their work in an efficient, strategic and cost-effective manner to ensure the best possible outcomes for their clients.
- Christopher Hughes
Legal Grounds for Contesting a Claim in New Jersey
In New Jersey, insurance companies can contest a claim based on various grounds, including misrepresentation, fraud, or failure to disclose information during the application process. If the insurer alleges any of these issues, they must prove that the misrepresentation or fraud was significant enough to have influenced the decision to issue the policy. It’s important to note that the insurer’s ability to contest the claim depends on whether the claim falls within the contestability period and the nature of the alleged misrepresentation. It’s also worth mentioning that not all misrepresentations or omissions are considered fraudulent or grounds for contesting a claim. For example, if the insured person forgot to disclose a minor detail that did not significantly affect the insurer’s decision to provide coverage, the claim should not be contested. Therefore, it’s essential to carefully evaluate whether the insurance company has valid legal grounds for contesting your claim.Your Rights as a Beneficiary
As a beneficiary, you have rights under New Jersey law to receive the insurance payout if the policyholder was truthful on their application and there is no legitimate reason for the insurer to contest the claim. If the insurance company wrongfully denies or delays your claim, you have legal options for recourse. New Jersey law provides a framework for beneficiaries to hold insurers accountable if they act in bad faith. If the insurer wrongfully denies the claim, fails to investigate the claim properly, or unreasonably delays payment, you can take legal action against them for bad faith. In some cases, you may be entitled to compensation for any financial harm or emotional distress caused by the insurer’s actions.Life Insurance Denial Statistics
20%
The annual average number of life insurance claims denied.
$50 Million
The yearly average dollar amount of claims denied by life insurance companies.
.2%
The number of claims appealed annually by consumers.