When can an insurance company challenge a claim based on misstatements?

An insurance company can challenge a claim based on misstatements during the contestability period, which typically lasts for the first two years of a policy. This timeframe allows insurers to thoroughly investigate the accuracy of information provided by the policyholder at the time of application. During this period, if it is determined that a policyholder made material misrepresentations or failed to disclose critical information, the insurer has the right to deny a claim or void the policy altogether.

After the contestability period ends, the insurance company generally cannot contest claims based on misstatements unless there is evidence of fraud, as the contract has become final and the insurer has accepted the risk. Therefore, the contestability period is a crucial phase for insurers to ensure the integrity of the application process and to protect against potential losses due to misrepresentation. This aspect of policy mechanics underscores the importance of honesty and accuracy when applying for life insurance.