Material misrepresentations in life insurance applications are perhaps the most common ground for life insurance denials. For life insurance policies issued to New Jersey and New York residents, the insured must pass away within two years of the date the policy was issued for a denial to be made based on a material misrepresentation. The rationale behind the contestability period is to prevent life insurance denials from being made years after a policy is issued, when the insured has passed away and beneficiaries would have a difficult time asserting a defense.
That means a life insurance company cannot deny payment on a policy more than two years after it was issued on the grounds that a material misrepresentation was made in the application.
What is a material misrepresentation?
Material misrepresentations are commonly alleged to have occurred with respect to the following:
- Medical history and current health
- Assets and income
- Other life insurance policies in existence
- Alcohol or tobacco use
- Dangerous hobbies and activities
When the insured dies within the two-year contestability period, the insurance company will routinely scour the application and compare it with medical and financial records to determine if there are discrepancies. If one or more are found, there is a high risk that there will be a life insurance denial. While life insurance companies frequently do not request medical and financial records from applicants before issuing a policy, they almost always do so when the insured dies within the contestability period.
This practice, which has been heavily critiqued by consumer and policyholder advocates, is referred to as “post claim underwriting.” Click here to read an article by Attorney Eric Dinnocenzo on this topic.
If you have suffered a life insurance denial based on an alleged material misrepresentation, you can contact New York and New Jersey life insurance attorney Eric Dinnocenzo at (212)933-1675 for a free consultation.