Continuing on with dissecting life insurance policies, the suicide and contestability clause is common to all policies, whether term insurance, whole life or universal life. Referring back to my policy, let’s look at the two provisions.

Incontestability and Suicide clauses

On the third page of this attachment under General Provisions they cover the two year suicide and contestabiltiy clause.

You can read the specific legal language, but in a nutshell what they are saying is that if you die from suicide or something that was materially misrepresented on the application, during the first two years of the policy the company can refuse to pay the death benefit. After two years the only reason they can refuse to pay is for non payment of premium.

Sounds a little ominous, but if you tell the truth about your health history and don’t do yourself in, the company is going to pay.

Just a note about my experience with clients who have passed away during the contestable period. I have never had a contestable policy that wasn’t paid in full dating back to 1978 when I wrote my first life insurance policy. It’s important for agents to push for full disclosure from their clients. It protects the client’s family.

Contestable claims take longer than a claim after the two year contestable period. Companies take this seriously and work diligently to get all of the records they need to satisfy themselves that what you died from wasn’t known to you at the time of application.

One client of mine is probably the epitome of why it takes longer. About 6 months after his policy went in force he was diagnosed with colon cancer. He lived for about 4 months. In that 4 months, without exaggerating, he saw 25+ doctors. Now, getting records from 25 doctors can be done fairly expeditiously if you have all of their contact information from the start. The problem was that he was the only one who knew all of the doctors he had seen, so the insurance company was peeling an onion. They would get one record and it would note a referral to another doctor. They would get that record and it would note another referral, and on and on. It took four months to settle the claim, but it was paid in full with interest for the four months.

A piece of good advice would be, if you are terminally ill, and you have life insurance in force, keep a record of all the doctors you see and their contact information and make sure your beneficiary knows where the list is.

Bottom line. Insurance companies want to pay claims. Sounds crazy, but it is true. Remember, tell the truth and don’t do yourself in and your heirs will get the proceeds of your life insurance.

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