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A life insurance policy is a contract between your insurance company and you, the policyholder.

While the benefits of life insurance are clear, there is always a risk that a claim is denied because the information is omitted from an insurance application.

To offset this risk, the Texas Legislature and most other states have enacted a law requiring all life insurance policies to contain an incontestability clause. See Texas Insurance Code, Section 1131.104.

This law states that your insurance company cannot contest the validity of your life insurance policy after it has been in force for two years from its date of issue.

The purpose of an incontestability requirement is to protect you from a challenge to the validity of your policy long after the policy has been issued.

The idea behind this requirement is that a life insurer has a duty to investigate the medical history of its policyholders and must take affirmative steps to void a policy or readjust a premium within the first two years that the policy was issued. 

However, a life insurer can refuse to pay a claim after the two-year incontestability period if it can prove that the insured made intentional misrepresentations in the insurance application. Texas Insurance Code, Section 705.104

Additionally, Texas Insurance Code, Section 1131.104 says that a statement you made relating to your insurability can’t be used against you in a suit contesting the validity of your policy, provided that your policy has been in effect for two years or more.

However, your insurance company can use a written statement against you after the two-year incontestability period to try to prove that you made a material misrepresentation in your life insurance application.

If your life insurance company tries to challenge the validity of your life insurance policy, you should contact a Texas insurance lawyer as soon as possible.

How Does an Incontestability Clause Help You?

When you purchase a life insurance policy, the clock begins running on the incontestability clause’s effective date.

If your insurance company has not found an error in your application within two years of the date of the issue, it cannot cancel your policy unless one of a handful of exceptions is met.

In other words, the insurance company has two-years to contest the information in the insurance policy. 

If applicable, your beneficiaries will receive their benefits due to your policy even if your insurance company claims that misrepresentation in your application made the policy invalid.

A Texas insurance lawyer can help you understand how the incontestability clause in your life insurance policy can help you.

What Are Some Exceptions to Incontestability Clauses?

Nevertheless, insurance companies can often cancel or modify your life insurance policy in a few circumstances.

Misstated Age or Gender

First, if you misstated your age or gender on your application, your insurance company may modify your insurance benefits to reflect your true age and gender.

This is because many insurance policies contain a “misstatement of age” provision that specifies the insurance benefits will be adjuster based on the insured’s actual age. 

Death during the Application Process

Second, if you die before the incontestability clause expires, your insurance company may be able to cancel your policy if the applicant made any misrepresentations in the policy application.

Importantly, the misrepresentations do not have to necessarily be material or intentional.

Any misrepresentation or omission, even slight, can normally be used to cancel a policy before the expiration of the incontestability period.

However, if the applicant did not make any misrepresentations or omissions in the policy application, and subsequently dies within two years after the policy was issued, the life insurance company is obligated to pay the claim.    

Nonpayment of Premiums

The life insurance company can always cancel a policy for failure to pay premiums regardless if it occurred before or after the two-year contestability period.  

Insurance Fraud: Intentional Misrepresentations

Your insurance company may also void your policy and refuse to pay if they can prove that the applicant engaged in insurance fraud.

Insurance fraud occurs when you make deliberate misrepresentations to obtain benefits you’re not entitled to.

The issue of fraudulent misrepresentations versus negligent omissions is the key source of conflict in many life insurance disputes.

For example, a life insurance company may claim that an applicant’s failure to disclose a medical condition on the application is evidence of fraudulent intent.

However, in most cases, that is not true. Many applicants innocently omit certain details about their medical history on a life insurance application.

Think about all of the times you have been to the doctor and consider if you can recall every medical condition or diagnosis you have had.

Many life insurance companies will seize upon an innocent omission to try to deny the claim.

If your life insurance claim has been denied due to an alleged misrepresentation in the policy application, do not be dismayed.

Insurance companies make money by denying legitimate claims.

However, a Texas insurance lawyer can advise you as to whether one or more of these exceptions might apply to your case.

What About Misrepresentations Caused by an Agent’s Negligence?

One issue that comes up often is a misrepresentation or omission in the insurance application that was not the applicant’s fault. Instead, it was the fault of the insurance agent.

Most of the time when you apply for life insurance your agent will walk you through the application and write down your information.

In fact, it is not uncommon for the application to take place over the phone. We recently had a deposition in a case where the insurance agent admitted that he never asked questions as they actually read on the insurance policy. Think about that.

How can you provide honest responses in an insurance application when the agent does not even ask you the correct questions. 

Sometimes courts will impute the agent’s negligence onto the insurance company.

This means that any misrepresentations or omissions in the application are the faults of the insurance company and the policy cannot be voided.

We must caution that courts will often impute an agent’s negligence onto an insurance company only where the agent receives payment directly from the insurance company or is a “captive” agent for the insurance company.

Further, you may have a separate claim against the insurance agent if his or her negligence caused you damages.

If your claim involves issues of agent negligence, we highly recommend that you speak with an attorney. 

What Should You Do If Your Life Insurance Company Challenges Your Policy?

If your life insurance company challenges the validity of your policy, you should contact a Texas insurance lawyer.

Legal action against your policy gives you the opportunity to hire a lawyer and challenge the claim.

The insurance lawyers at The Johns Law Firm can negotiate with your insurance company or fight for you in court. Contact us today to schedule your free consultation.

Author Photo

Jeremiah Johns

Jeremiah N. Johns is a trial attorney who represents clients in insurance, maritime, personal injury, and litigation matters. Raised on a family farm in Southeast Georgia, at an early age he gained an appreciation for hard work and ingenuity. These values form the bedrock of his practice.​ Jeremiah holds an LL.M. in Admiralty from Tulane Law School and a J.D. from Syracuse University, where he graduated with honors. He also graduated magna cum laude with bachelor degrees in political science and economics from Georgia State University.