Insurers depend on accurate information about health, lifestyle, and habits when evaluating and rating applications for coverage. The two year contestable clause encourages applicants to be truthful about these matters.

When a claim comes in during the contestable period, the insurance company may assign an examiner to review and verify the application's accuracy. An intentional discrepancy may reduce or even cancel death benefits. For example, life insurance premiums are less for nonsmokers. Identifying yourself as a nonsmoker may affect policy benefits if you die during the first two years of the policy when this is not the case. The insurer may subtract money from the death benefit based on the rate you should have paid. Not informing the company about a current or past medical condition could be even worse. The insurer could cancel the policy altogether.

The contestable period starts over if the policy is reinstated after canceling for nonpayment, you apply for new coverage, or transfer funds to a different life insurance policy.

Be honest and forthcoming when applying for life insurance to avoid claim issues during the contestable period.