When is it common for an insurance company to contest a policy's validity?

The common practice for insurance companies to contest a policy's validity is typically within the first two years of coverage. This period is often referred to as the "contestability period." During this time, insurance companies are allowed to review claims more closely and investigate whether any misrepresentations were made during the application process. If they discover significant misstatements or omissions that could affect the risk assessment, they can contest the claim.

This two-year timeframe is significant because it gives insurers a window to ensure that their underwriting processes are sound and that they are not liable for claims based on information that was deliberately misrepresented or not disclosed by the policyholder. After this period has passed, it becomes more difficult for insurance companies to contest a claim unless there are exceptional circumstances, such as a fraudulent act.

Understanding this timeframe is crucial for both consumers and agents in the funeral prearrangement field, as it impacts how policies are structured and the trustworthiness of the coverage provided.