In the process of applying for life insurance, we are often particularly concerned, is it difficult to settle claims in American insurance? Will the US insurance company reject the claim? At this time, professional brokers usually take out the “incontestable clause” in the policy contract for analysis. Today’s column will introduce what does the “incontestability clause” in American insurance contracts look like and what does it mean? What does it do for us policyholders? Why is it said that it solves the problem of “difficult claims settlement” in insurance.
What is an “incontestable clause”?
The incontestability clause is called “Incontestability Clause” in English. This clause is a clause in most American life insurance contracts, which is used to avoid the situation that the insurance company refuses to settle the claim after a few years because of “misstatement” at the time of insurance application.
What does an “incontestable clause” look like?
The main function of the incontestability clause is to protect the policyholder. A screenshot of a whole life policy document provided by the editor shows the specific content of the clause. A typical incontestable clause will specify that after 2 or 3 years, the insurance company shall not refuse to settle the claim because of “misstatement”.
In the above case, what this clause helps us solve is that the insurance company shall not refuse to settle the claim two years later because of the “misrepresentation” at the time of insurance application.
Then we can’t help asking, why is there such a clause? In my opinion, to answer this question, it is necessary to review the development history of the European life insurance industry.
The refusal to pay compensation caused a crisis of confidence
In the early 19th century, in the life insurance market in the UK, insurance companies often refused to pay compensation on the grounds that the policyholders had not truthfully informed them when applying for insurance, and similar contract disputes emerged endlessly.
Insurance companies were even teased at the time as “the great nonpayers.” This phenomenon has also directly led to a crisis of confidence in insurance companies, threatening the survival and development of insurance companies.
Introduction of incontestable clauses to restore credit
In 1848, the incontestable clause was first applied to the products sold by the London Life Insurance Company. That is to say, after the contract becomes effective for a certain period of time, the insurance company will not refuse to pay compensation on the grounds of the policyholder’s misrepresentation or omission. After the introduction of the incontestable clause, it has been widely welcomed by the market, and has greatly improved the relationship between the insurance company and the policyholder, and won the trust of the insurance company.
In 1930, the incontestable clause became a statutory clause for the first time, which was stipulated by the New York State Insurance Supervision and Management Department in the state’s insurance laws, requiring all life insurance policies to include this clause to restrict the behavior of the insurer and protect the policy holders. People’s interests, preventing insurance companies from unjust enrichment, and ultimately protecting the healthy development of the entire insurance industry. Afterwards, the incontestable clause was adopted in the form of legislation, a fixed clause in the American life insurance contract.
Exclusion of “Incontestability Clause”
It is worth noting that the “incontestable clause” is a description of the “Misstatement” condition, and if it is determined by the insurance company to be “fraud (Fraud)”, it is not protected by this clause. At the same time, the “suicide” compensation situation is usually not within the applicable scope of this clause.
Claims settled within two years of the “defense period”
If the “Misstatement” occurs within two years of the policy contract, there are three situations that may occur: refund of the premium; non-refund of the premium; claim according to the terms. The first two of these three situations will affect our rights and interests, and there may be endless lawsuits.
Purchasing American life insurance is to have the insurance company cover the financial situation in the event of an accident, so as to make you feel at ease. But if we buy insurance in a “misrepresentation” way, we may even sleep thinking about it: Will we pay for it after an accident within two years? This kind of long-term unreliability in the heart is actually another kind of torture. Then this is not buying insurance, but buying a new risk with a “lucky” mentality and causing trouble for yourself.
Therefore, the policyholders are reminded that despite the existence of the “incontestable clause”, in order to completely transfer our own risks, it is very important to make a truthful statement and application, and we must tell the truth.
Summary of the article
From the history of the development of laws and regulations in the life insurance industry, we can know that the birth of the “incontestable clause” originated from the “credit” crisis in the early European insurance industry, and finally developed into a policy with the main function of “protecting the legitimate rights and interests of insurance consumers”. The industry standard, this historical process towards soundness has gone through nearly 200 years.
Therefore, with the legally effective clauses written into the contract as a guarantee, do you believe that readers have already found it difficult to settle claims for American insurance? Will the insurance company not pay? This question has its own answer.
