I have a question. Has there ever been a situation where a smoker died outside the contestability period and was denied a death claim for misrepresenting his smoker status on an application. Some agents and I were discussing insurance laws and one the agents said the company could still void the contract after the 2 yr contestability period is over. That made no sense to me. Why have the clause at all then? I have heard of policies being rescinded after the 2 yr period in impostor cases (where some one else took the exam) but not for misstatements. I have looked briefly on the net and found the contestability clause to very absolute except for in extreme cases like impostor fraud. Thoughts?
Incontestability Clause
- Thread starter u18247
- Start date
- 586
The laws maybe different in your state however,
In wa state, lying on an application about being an tobacco user is not grounds for denying payment of a claim.
The insurance company can pro-rate the payment to what the policy WOULD HAVE paid had the insured disclosed that he was a tobacco user.
So for instance hes paying lower premiums for non tobacco then for tobacco so the insurance company can reduce the amount they are going to pay.
In wa state, lying on an application about being an tobacco user is not grounds for denying payment of a claim.
The insurance company can pro-rate the payment to what the policy WOULD HAVE paid had the insured disclosed that he was a tobacco user.
So for instance hes paying lower premiums for non tobacco then for tobacco so the insurance company can reduce the amount they are going to pay.
- 15,041
Really, care to cite your source?
- 4,132
Life insurance is a contract. Are you saying it's OK to lie on one contract, but not another?
In my state the OIC is the one who change the rules, not the insurance companies. They used to pay the DB at what a smoker policy would be. The OIC stepped in and said NO.
As far as smoking or not smoking being a mistatement? Cmon.
In my state the OIC is the one who change the rules, not the insurance companies. They used to pay the DB at what a smoker policy would be. The OIC stepped in and said NO.
As far as smoking or not smoking being a mistatement? Cmon.
- Thread starter
- #5
What is your opinion? I looked up washington state statute and it is very simply stated that the policy is incontestable after 2 years. Makes no mention of tobacco.
- 15,041
If caught within two years of policy issue, rescession. Afterwards, death benefit is paid in full. That is, unless Washington's legislature or courts have allowed another way to rescind the policy.
The two generally accepted rules to alter the death benefit after two years is for misstatement of age or gender. Someone did link to a New Jersey court decision that allowed a STOLI policy to be rescinded for fraud even though it was more than two years after issue.
- Thread starter
- #7
I am not saying it is "ok" to lie. By mistatement I meant a "material misrepresentation." The clause was established for the common good of the consumer. They wanted the consumer to be comfortable that the insurance company would pay out so the states demanded the contestability provision. That way insurance companies could not investigate death claims for an infinite amount of time.
I am not defending lying or being immoral. I am just trying to understand the law as it is written.
I am not defending lying or being immoral. I am just trying to understand the law as it is written.
- Thread starter
- #8
Thank you. That is my understanding as well. Like I said earlier, I have also heard of claims being denied because of imposter fraud.
- 15,041
Someone mentioned that as well. I suppose the courts might side with the insurance company in a case of egregious fraud. Despite how clear the law is written, it is in society's interest to prevent profiting through fraud. The courts have a history of making exceptions to the law when it fits public policy.
I have a question. where another owner takes over the payment of premiums waiting for an insured to die would this be considered fraud and a Stoli. He became the second owner. Don't know if there was a chage of ownership done with the carrier. It was told to me by someone I know who was asking for another individual. I AM NOT INVOLVEDD!
