Life insurance "incontestability clause"?

Question

Recently I read a widower in Massachusets was denied his insurance claims because his wife died within a year of taking it. There is a so called clause as mentioned above. What is it and what are its ramifications. What happens if a policy holders commits suicide after after 2 years.

Answer 1

incontestability clause (Definition)

A provision in a life insurance policy that prevents the insurer from revoking coverage because of alleged misstatements by the insured after a specified period, usually about two years. Of course, this is not a license to commit fraud, and the discovery of fraud will lead the company to contest any claims and possibly pursue criminal charges.

The incontestability clause strikes a balance between providing predictable coverage and protecting the right of insurers to select the precise risks they seek to insure.

In the case of the widower in MA, the insurance company must have believed that the couple left information out of the application for insurance.  If the insurance company had that information, they would not have given the life insurance policy.

Addressing your question about suicide, if the policy had gone past the two year period, the insurance company would pay. In general, most rational people do not plan their own suicide two years in advance.  And if there was a history of mental instability, no policy would be issued.