Life Insurance Contestability and Material Misrepresentation: What Policyholders and Beneficiaries Must Know

Dec 26

Life insurance is supposed to provide financial security at the moment families need it most. Yet thousands of beneficiaries each year are shocked to receive a denial letter stating that the policy is rescinded, void, or contested because of a material misrepresentation on the application.

If your life insurance claim has been denied based on alleged misrepresentation—or you are filling out an application right now—understanding contestability and material misrepresentation is critical. These two concepts form the backbone of some of the most aggressive life insurance claim denials nationwide.

This guide explains how contestability works, what insurers mean by “material misrepresentation,” how innocent mistakes turn into denied claims, and what beneficiaries should do if a claim is denied.

What Is the Life Insurance Contestability Period?

Most life insurance policies include a contestability period, typically lasting two years from:

The policy’s issue date, or
The date of policy reinstatement after a lapse

During this period, insurers are allowed to investigate the accuracy of the application and challenge the policy if they believe incorrect information was provided.

What insurers can do during contestability

During the contestability period, insurers may:

Pull medical records
Review prescription histories
Order motor vehicle reports
Review criminal and financial records
Re-examine application answers line by line

If the insurer concludes that an answer was false and material, it may attempt to rescind the policy—even if the insured has already died. Contestability applies even if the cause of death has nothing to do with the alleged misstatement.

What Happens After the Contestability Period Ends?

Once the contestability period expires:

Insurers generally cannot rescind the policy for misrepresentation
Claims are typically payable unless the insurer proves fraud (a much higher bar)

That is why insurers aggressively scrutinize claims when death occurs within the contestability period.

What Is “Material Misrepresentation” in Life Insurance?

A material misrepresentation is a statement on the application that:

Is false or incomplete, and
Would have affected the insurer’s underwriting decision

In simple terms, insurers argue:

“If we had known the truth, we would not have issued the policy, reinstated it, or would have charged more.”

Key point many people don’t realize

The misstatement does not need to be intentional
Innocent mistakes can still be deemed “material”
The insurer decides materiality first—but courts often review it later

Call 1-888-510-2212 for a FREE consultation with a life insurance lawyer.

Common Examples of Alleged Material Misrepresentation

Insurers frequently base rescission on issues such as:

🔹 Medical History

Undisclosed diagnoses
Incomplete disclosure of symptoms
Omitted diagnostic tests and follow-up appointments
Conditions the insured didn’t realize were “diagnoses”

🔹 Prescription Medications

Failure to list medications
Medications prescribed but not taken
Short-term or discontinued prescriptions

🔹 Smoking and Substance Use

Cigarette, cigar, vaping, or marijuana use
Illegal drug use history
Alcohol consumption
DUI or DWI history

🔹 Driving Record

DUI/DWI convictions
License suspensions or revocations
Incorrect dates or omissions

🔹 Financial or Occupational Information

Income discrepancies
Hazardous occupations
Aviation, diving, or risky hobbies

Many claim denials arise not from lies—but from confusing, poorly worded application questions.

Why Reinstatement Applications Are Especially Risky

When a policy lapses for nonpayment, insurers typically require a reinstatement application. This is not just a formality.

A reinstatement application:

Often restarts the contestability period
Allows insurers to re-underwrite the risk
Is treated like a new application for rescission purposes

Mistakes on reinstatement applications are among the most common reasons claims are denied. Many policyholders assume they are “just reinstating.” Insurers often see it as a second chance to deny.

What Is Life Insurance Rescission?

Rescission means the insurer voids the policy as if it never existed.

When rescission occurs:

No death benefit is paid
The policy is declared void ab initio
Insurers usually offer to refund limited premiums
Beneficiaries receive nothing

Rescission is devastating—but it is not always lawful.

Why Insurers Rely So Heavily on Misrepresentation Denials

From an insurer’s perspective:

Misrepresentation is a powerful defense
It applies even when death is unrelated
It shifts the burden onto beneficiaries
Many families don’t challenge it

From a legal perspective:

Insurers must prove materiality
They must show reliance
They must follow policy language and state law
Waiver, estoppel, and bad-faith defenses may apply

What Beneficiaries Should Know When a Claim Is Denied for Misrepresentation

If you are a beneficiary and your claim is denied, do not assume the insurer is right.

Many denial letters:

Overstate materiality
Ignore underwriting inconsistencies
Misapply state law
Overlook waiver or premium acceptance issues

What to look for in denial letters

“Void ab initio”
“Material misrepresentation”
“Policy rescinded”
“Contestability review”
Refund of premiums enclosed or offered

If you received a denial letter due to material misrepresentation, call 1-888-510-2212 for a FREE consultation with a life insurance lawyer.

What To Do If a Life Insurance Claim Is Denied for Material Misrepresentation

Step 1: Do Not Accept the Refund Immediately

Accepting refunded premiums can weaken your position.

Step 2: Preserve All Documents

Save:

The policy and amendments
The application and reinstatement application
Medical and pharmacy records
The denial letter
Proof of premium payments

Step 3: Identify the Alleged Misrepresentation

Ask:

What specific question was allegedly answered incorrectly?
Was the question ambiguous?
Was the information reasonably known to the insured?

Compare the answer to the actual medical record. Is there a discrepancy?

Step 4: Consider Legal Review Immediately

Many rescission cases hinge on fine legal distinctions. Timing matters.

What Applicants Must Keep in Mind When Filling Out Life Insurance Applications

If you are applying for or reinstating life insurance:

✔ Over-Disclose When in Doubt

Ambiguity favors insurers, not applicants.

✔ Read Questions Literally

Do not interpret questions narrowly or assume context.

✔ Disclose DUI and Driving History Accurately

Even old or “minor” offenses matter.

✔ Do Not Guess on Medical Information

If unsure, say so or reference medical records.

✔ Keep Copies of Everything

What you submit today may be scrutinized years later.

A few extra minutes can save your family from a denied claim later.

Why Many Misrepresentation Denials Are Successfully Challenged

Courts often examine:

Whether the question was clear
Whether the insurer already had the information
Whether the insurer accepted premiums after learning the truth
Whether the misstatement truly affected underwriting
Whether the insurer followed its own guidelines

Denied Due to Material Misrepresentation? Don’t Navigate This Alone

If a claim was denied based on:

Contestability
Material misrepresentation
Reinstatement application issues
DUI or medical history
Policy rescission