You bought a life insurance policy to give your family financial security if you die. Unfortunately, the life insurance company will do whatever it can to deny your family’s claim.
The “Contestability Period” is the one or two years after you buy a life insurance policy. If you die during this period, the life insurance company gets to look back over your application and your medical records for any misrepresentations or mistakes you made on your application. This is known as “retroactive” or “post-claim’ underwriting.
If the life insurance company finds anything, it may try to “rescind” or retroactively cancel your policy altogether, and deny your family’s claim. Typically, the life insurance company will send a check returning the money you paid in premium, which is far less than the amount of insurance you bought.
What Misrepresentations Do Georgia Life Insurance Companies Look For?
Life insurance companies consider any inaccurate answer in your application to be a “misrepresentation.” This is especially true in your answers about your health conditions and medical history. In Georgia, your answer can be considered a “misrepresentation” even if you believed it was true. Worse yet, many life insurance application questions are phrased in vague or ambiguous language. This gives life insurance companies an opening to cherry-pick their own preferred meaning for their application question, and argue that your answer was a “misrepresentation” when you simply interpreted the question differently.
What Must The Misrepresentation Be About In Georgia Life Insurance?
Anything!
In Georgia, the “misrepresentation” does not need to be related to how you actually died. Even if you died in an accident, or from a completely unrelated health issue, a life insurance company can use any “misrepresentation” in your application as an excuse to deny your family’s claim. Not checking the box for a past health issue, misstating your age, or even mistaking your address can give the life insurance company a reason not to pay out.
How Does Contestability Affect Georgia Life Insurance Payouts?
Some Georgia life Insurance companies may still honor your life insurance policy even if some of your application answers were not entirely accurate, but this is highly dependent on the claims department of the particular life insurance company involved. Some will manipulate the smallest of errors, and create a “misrepresentation” to avoid a payout completely, while others will dramatically reduce the payout based on the details.
Why Don’t Some Georgia Life Insurance Companies Investigate Before Issuing Your Policy?
To make more money.
You might think any life insurance company would need to investigate you thoroughly before issuing you a new life insurance policy. In the insurance industry, this investigation is known as “underwriting.” Underwiring is usually an important part of the insurance process, and thoughtful, thorough underwriting is usually done before a new policy can be issued to be sure the premium charged is appropriate for the insurance coverage provided.
So why do some life insurance companies offer quick, on-line applications for no-exam life insurance policies with just a few health questions, and no way of knowing your most basic of health issues or detailed medical history?
The life insurance company tells you the reason is to avoid an unpleasant exam, and waiting months for your new policy to get approved. It tells you not to worry about these details. Its application asks you to answer a few basic questions, check some boxes next to some vague medical phrases, and provide your bank or credit card numbers. If the life insurance company cares so little about your health status, maybe you can even fudge a little on you application answers. What harm could it do, and you get a new life insurance policy right way. You feel good about protecting your family, the on-line process was easy, and your payments start automatically. Sounds like a win-win, right?
Unfortunately, it’s usually only the life insurance company that wins. If you buy a life insurance policy this way, and stop paying the premiums, the company will cancel the policy and keep all the money you paid. If you buy a policy this way, and pass away within the “Contestability Period,” the life insurance company will look back over your application for any simple mistake it can say was a “misrepresentation” to justify retroactively cancelling the policy. By encouraging you to submit incomplete or even slightly inaccurate answers to its ambiguous application questions these life insurance companies give themselves the best opportunity to deny your family’s claim. This after-death process is also known as post-claim underwriting, in which the life insurance company finds an excuse to rescind your life insurance policy after you die to avoid the payout.
Is My Georgia Life Insurance Coverage Safe After The Contestability Period Ends?
The short answer is no. Your “Contestability Period” can start anew if you get behind on your monthly payments, and have to reapply for your life insurance policy. This can trigger the “Contestability Period” to begin all over again from the new effective date. So even if you had life insurance for many years, if you pass away within two years of reapplying after a payment lapse, your policy is once again subject to post-claim underwriting before your family can expect any payout.
Phillips Law has represented many Georgia clients stuck with life insurance claim denials and policy rescissions based on claimed application “misrepresentation.” If you find yourself in this situation, please call us for a free consultation.