Question

Explain the “Incontestable Clause” and the interaction of that clause with the “Misstatement of Age Clause”.

Answer 1

Incontestable Clause in insurance claim is made to protect the rights of beneficiary on the time of death claims. This clause states that if any irregularity or misinformation provided by the insured person at the time of taking insurance policy then the insurance company has to check that irregularity within two years of policy issued. Suppose the insured person died after two years of taking policy then in any case the insurance company should have to pay the death claims to the beneficiary even if some misstatement or irregularities are found after the death of insured person. Therefore this clause is made to protect the rights of beneficiaries and to stop the insurance companies from avoiding any rightful payment to the beneficiaries.

The interaction of Incontestable clause with the Misstatement of Age Clause is interesting. Suppose if insured person has misstated his/her age at the time of policy issued and died after two years. In that case, the insurance companies have to pay the death claims to beneficiary but they can deduct the difference in the amount of premium should be paid and it was actually paid from the beneficiary’s final proceeds.