Disability Insurance Contestability Period: Why Transparency Matters

When purchasing disability insurance, most people expect that if they become injured or ill and are unable to work, their policy will provide income replacement when they need it most. In most cases, that expectation is correct. However, there is a critical provision many policyholders overlook: the disability insurance contestability period.

Understanding how the contestability period works – and why transparency during the application process is essential – can help prevent claim denials and ensure your coverage performs exactly as intended when you rely on it.

What Is the Contestability Period in Disability Insurance?

The contestability period in disability insurance is typically the first two years from the date your policy is issued. During this timeframe, if you file a disability claim, the insurer has the right to thoroughly review your application and investigate whether any material information was omitted or misrepresented.

If the insurer discovers a material misrepresentation; meaning incorrect or missing information that would have affected underwriting approval, policy terms, or premium pricing, they may reduce benefits, modify the policy, or deny the claim entirely.

It's Not Just About the Cause of Disability

A common misconception is that the insurer can only deny a disability claim if the misrepresentation is directly related to the disability itself. This is not true.

For example, if an applicant failed to disclose a prior mental health diagnosis but later files a claim due to a physical injury, the insurer may still deny the claim if the omission is deemed material. The key question is whether the missing information would have influenced the insurer's decision at the time the policy was issued — not whether it caused the disability.

Why Does the Disability Insurance Contestability Period Exist?

The contestability period exists to protect insurers from applicants who may unintentionally or intentionally withhold information to obtain coverage they might not otherwise qualify for, or to secure lower premiums.

Disability insurance underwriting relies heavily on accurate disclosure because the likelihood of claim is significantly higher than with life insurance. Insurers expect full transparency regarding:

• Medical history, including past injuries, illnesses, and mental health conditions

• Ongoing treatments, medications, or specialist follow-ups

• Occupational duties and physical demands

• Lifestyle factors and high-risk activities

Without a contestability period, insurers would face increased risk from applicants who could misrepresent their health or occupation to obtain favourable coverage terms.

What Happens If the Insurer Finds a Misrepresentation?

When reviewing a disability claim during the contestability period, insurers assess whether the misstatement is material under their underwriting guidelines. Outcomes generally fall into one of the following categories:

Non-Material Disability Insurance Misstatements

Example: Forgetting to disclose a routine medical visit with no abnormal findings.

If the omitted information would not have affected eligibility or premium pricing, the claim typically proceeds without issue. Minor, honest mistakes are generally not penalized.

Material Misstatements With Minor Impact

Example: Failing to disclose a mild, well-managed condition such as controlled hypertension.

In these cases, the insurer may adjust the benefit amount or apply revised policy terms that reflect what would have been issued had the information been disclosed.

Major Material Disability Insurance Misstatements

Example: Not disclosing ongoing investigations with a specialist that later resulted in a serious diagnosis.

If the insurer determines the policy would not have been issued (or would have been postponed) had the information been known, the claim may be denied entirely.

Intentional Misrepresentation (Fraud)

If the insurer concludes the applicant knowingly withheld or falsified information to obtain coverage or lower premiums, they will typically deny the claim and may refund premiums paid.

How the Incontestability Clause Protects Policyholders

After the contestability period expires, most disability insurance policies become incontestable, meaning the insurer can no longer deny a claim due to application misstatements – unless they can prove fraud.

This provision exists to protect policyholders from insurers revisiting application details years later to avoid paying legitimate claims. It provides long-term certainty once coverage has been in force for a sufficient period.

Exceptions to Incontestability

• Policy lapses and reinstatements: Reinstating a lapsed policy may trigger a new contestability period

• Policy changes: Increasing benefit amounts or adding riders may also restart the contestability clock for the new coverage

How to Avoid Issues During the Contestability Period

To minimize risk and protect your future benefits:

• Be fully transparent on your application, including medical history and pending investigations

• Review your application carefully when the policy is issued to confirm all answers are accurate

• Disclose occupational duties accurately, especially for professionals and tradespeople

• Understand policy changes, as adjustments may reset the contestability period

Honesty at the application stage is the single most effective way to ensure your disability insurance works when you need it.

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What to Do If a Disability Insurance Claim Is Denied

A denial during the contestability period is not always final. Some decisions can be challenged, particularly when misstatements were minor, unintentional, or misinterpreted.

Steps to take include:

• Reviewing the denial letter in detail

• Gathering medical records and application documentation

• Consulting an insurance professional or legal expert

Final Thoughts: Transparency Protects You

The disability insurance contestability period is designed to protect insurers, but it also serves as a reminder of how critical transparency is for policyholders. Providing complete and accurate information ensures that if illness or injury disrupts your ability to earn an income, your benefits will be there without unnecessary complications.

If you have questions about your disability insurance policy or want help reviewing your coverage, we're here to help you secure confidence, clarity, and peace of mind.

– Jeff

*Disclaimer: This article is intended for general informational and educational purposes only and does not constitute personalized insurance, financial, legal, or tax advice. Insurance needs, policy features, costs, and suitability vary based on individual circumstances and specific contract provisions. Coverage availability and terms are subject to insurer underwriting and approval. Readers should review their own situation carefully and consult with a licensed insurance advisor before making any insurance decisions or changes to existing coverage.