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The Journal of Risk and Insurance Vol. 35, No. 4 (Dec., 1968) , pp. 515-535 (21 pages) Published By: American Risk and Insurance Association https://doi.org/10.2307/250880 https://www.jstor.org/stable/250880 Read and download Log in through your school or library Alternate access options For independent researchers Read Online Read 100 articles/month free Subscribe to JPASS Unlimited reading + 10 downloads Purchase article $9.00 - Download now and later Read Online (Free) relies on page scans, which are not currently available to screen readers. To access this article, please contact JSTOR User Support. We'll provide a PDF copy for your screen reader.With a personal account, you can read up to 100 articles each month for free. Get StartedAlready have an account? Log in Monthly Plan
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Abstract The separate evolvement of the misstatement of age clause and of the incontestable clause are traced. The age clause is held to be a detriment and cause of loss to insureds and beneficiaries, a profitable benefit and source of income to insurers and agents, and the cause of debasement and uncertainty in settlement. Insurers use death certificates to justify settlements at less than face value. Life insurance policies make three material misrepresentations by omitting essential information. Among major recommendations are: (1) insurers should extend the protection of the incontestable clause to age misstatements; (2) the age clause should be eliminated from life policies. Journal Information The Journal of Risk and Insurance publishes rigorous, original research in insurance economics and risk management. This includes the following areas of specialization: (1) industrial organization of insurance markets; (2) management of risks in the private and public sectors; (3) insurance finance, financial pricing, financial management; (4) economics of employee benefits, pension plans, and social insurance; (5) utility theory, demand for insurance, moral hazard, and adverse selection; (6) insurance regulation; (7) actuarial and statistical methodology; and (8) economics of insurance institutions. Both theoretical and empirical submissions are encouraged. Empirical work should provide tests of hypotheses based on sound theoretical foundations. JSTOR provides a digital archive of the print version of The Journal of Risk and Insurance. The electronic version of The Journal of Risk and Insurance is available at http://www.blackwell-synergy.com/servlet/useragent?func=showIssues&code;=jori. Authorized users may be able to access the full text articles at this site. Publisher Information The American Risk and Insurance Association (ARIA) is a worldwide group of academic, professional, and regulatory leaders in insurance, risk management, and related areas, joined together to advance the study and understanding of the field. Founded in 1932, ARIA emphasizes research relevant to the operational concerns and functions of insurance and risk management professionals and provides resources, information, and support on important insurance and risk management issues. Two main goals of the organization are 1) to expand and improve academic instruction of risk management and insurance, and, 2) to encourage research on all significant aspects of risk management and insurance. Rights & Usage This
item is part of a JSTOR Collection.
Couple buys life insurance A
life insurance incontestability clause limits the amount of time an insurer has to contest a policyholder’s coverage because of a misstatement on the policyholder’s application. When a policy takes effect, insurance companies have a set period of time in which to void or amend the contract on the basis of a misrepresentation or error on the application. But
after this set period of time, insurers may not use errors to void coverage. These clauses protect policyholders and their beneficiaries. Learn how incontestability clauses work as you consider buying life insurance. Life Insurance Incontestability Clauses Defined Clauses are built in to all life
insurance policies. Each clause protects either the policyholder, beneficiary or the life insurance company. Life insurance clauses are often referred to as exclusions, and every policy includes different clauses, so it is essential to understand your policy and what it covers. With the incontestability clause, the insurance company has a set period to dispute any of the statements that a policyholder made on their application. If they discover that a
person lied or misrepresented themselves on an application, the insurance company can terminate the policy. Alternatively, it can adjust the premiums due. How Life Insurance Incontestability Clauses Work A life insurance company typically has two years to dispute any of the life insurance application statements. In some
cases, the period is three years and in others one year. As soon as a life insurance policy takes effect, the incontestability clause period begins. During this period, an insurance company must prove that false or incomplete information was given by the policyholder when applying if it wants to contest the policy due to a misrepresentation by the policyholder. After this specific period ends, the insurance company can no longer challenge the applicant’s statements and are legally
required to pay out if the insured dies. If a life insurance policy lapses due to missed premium payments, the contestability period may start over when the coverage starts up again. Essentially, if someone stops making payments and the policy lapses and then they resume making payments, the the one- or two- or
three-year incontestability period starts all over. How Life Insurance Incontestability Clauses Protects Consumers Couple shops online for life insurance It’s sometimes easy to make a
mistake on a life insurance application. For example, let’s say you gained or lost some weight and didn’t update the data. Another example is if you forgot to include a piece of your medical history. To help mitigate the risk of applicants providing incomplete or false information on their applications, life insurance companies often require a medical history and a medical exam before approving a policy. These exams help ensure that all of the applicants’ information is correct and protects both parties from canceling or invalidating a policy. Once a policy is
purchased, the incontestability clause period begins. The life insurance company may validate any of the information provided in an insured’s application. If they find no errors after two years, a person’s life insurance benefits are guaranteed. Therefore, a person’s investment in life insurance is protected. Life Insurance Incontestability Clause Exceptions There are a few exceptions to the incontestability clause that it’s essential to be aware of when applying
for life insurance. The first exception is if a person misstates age or sex the insurer may adjust the death benefits to accord with the policyholder’s actual age or sex. lies when applying for life insurance. This exception applies in most states. The second exception, allowed in some states, permits an insurance company to void a life insurance policy if there was
deliberate fraud. Thirdly, if a policyholder dies during the incontestability period, the insurer will investigate if all the application information is correct. Therefore, if a policyholder dies a few months after completing their first payment, the insurance company is still legally allowed to search for any errors. If the insurance company
finds errors, it has two options. The first option applies to small mistakes. The insurance company can calculate the additional premium that the policyholder would have owed and deduct it from the death benefit payout. If the errors are large enough or fraudulent, the insurer could deny the claim. The Takeaway Man holding paper cutout of a family For the first two years or so of a person’s life insurance coverage, the insurance company has the right to investigate the person’s application to ensure that there are no misrepresentations. If there is a misrepresentation, the life insurance company can either adjust the death benefit to cover the payments that should have been made or deny any claims and cancel the policy. Errors are easy to make on life insurance applications. Therefore, incontestability clauses protect your beneficiaries from not receiving a death claim if an insurance company denies the death claim due to innocent mistakes. Insurance Planning Tips
Photo credit: ©iStock.com/shironosov, ©iStock.com/AleksandarGeorgiev, ©iStock.com/Philip Steury The post Guide to Life Insurance Incontestability Clauses appeared first on SmartAsset Blog.
Which of the following provisions prevents the insurer from denying a claim due to statements on the application after a certain period of time?Incontestability *Incontestability provision prevents an insurer from denying a claim due to statements in the application after the policy has been in force for a period of 2 years, except for nonpayment of premium or fraud.
What is the purpose of incontestable clause?An incontestability clause is a provision in a life or disability insurance policy that prevents the insurance company from canceling the policy based on misstatements in the policy application after the insurance has been in effect for a certain period of time, usually two years.
Who is protected under Incontestability clause?Incontestability clauses help protect insured people from firms who may try to avoid paying benefits in the event of a claim. While this provision benefits the insured, it cannot protect against outright fraud.
What is incontestable period?Incontestability period. (1) Upon a showing of misrepresentation that is material to the acceptance for coverage, a policy that has been in force for less than 6 months may be rescinded by the insurer or the insurer may deny an otherwise valid long-term care insurance claim.
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Which clause prevents an insurer from denying a claim due to statements in an application after a specified period of time?
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