Noncontestability Clause
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Noncontestability Clause
provision found in insurance contracts stipulating that policyholders cannot be denied coverage after a specific period of time, usually two years, even if the policyholder provided inaccurate or even fraudulent information in his or her insurance application. In order to contest the policy, the insurer must find out about the incorrect information before the clause goes into effect.
See incontestability clause.
See incontestability clause.
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| Noncontributory Pension Plan, Noncumulative |
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Noncontestability Clause
Barron's Law Dictionary:
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Noncontestability Clause
A provision in an insurance policy that precludes the insurer from disputing the validity of the policy on the basis of fraud or mistake after a specified period. If the insurer wishes to contest the policy on any grounds that would justify rescission of it, it must do so within the prescribed period, either by suing to cancel the policy or by asserting fraud or misrepresentation as a defense in an action instituted by the policyholder or beneficiary. 237 P. 2d 510, 512. The purpose of the clause is to require the insurer to investigate the accuracy of the information provided by the policyholder with reasonable promptness. It prevents the insurer from lulling the policyholder into a sense of security during the time when facts could best be ascertained, only to litigate them belatedly. Couch, Cyclopedia of Insurance Law §72.1 (3d ed.
1995).
1995).
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Dictionary of Finance and Investment Terms. Copyright © 2010 by Barron's Educational Series, Inc. All rights reserved.
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