Tuesday, December 23, 2008

Incontestability Clause

I was recently asked about the Incontestability Clause by one of my client. Below is my reply to him...


Hi Mr XXX,

Below is the actual wording from the i-term Policy Document with regards to incontestability

After one year from the Date of Issue or from the date of reinstatement, whichever is later, this Policy shall be incontestable except for fraud or non-payment of premiums.


This clause is to prevent the insurer from contesting or disputing the validity of the policy except on grounds of fraud or non-payment of premiums after policies have been in force for at least one year from the date of issue or date of revival.

The purpose of the incontestable clause is to protect the beneficiary if the insurer tries to deny payment of the claim years after the policy was first issued. This is because the insured will be dead and he or she cannot refute the insurer's allegations. As a result, the beneficiary could be financially harmed if the claim is denied on the grounds of a material misrepresentation or concealment.

I have not heard of any legal case with regards to incontestability in Singapore but in my opinion, the insurance company has to prove that there is fraudulent intent, in order to reject a claim after 1 years if they choose to reject a claims.

Fraud is a false representation calculated to deceive another into acting against her or his legal interest. Statements that are inaccurate but made without the intent to deceive are not fraudulent.

Hope my info helps with regards to incontestability. Thanks.

Adrian Khiat



Anonymous said...

The incontestability clause is a grey area - at least in Singapore. There is another legal jargon called the Breach of Good Faith which is regulated under the Insurance Act. If there was a material information withheld by the applicant during the proposal stage, the contract itself is void. Thus in my interpretation the Incontestabiilty Clause is not enforceable since there was no contract to begin with.

Anonymous said...

In US incontestability begins immediately after inception.

Anonymous said...

Yes, the logic is sound because we do not have to worry for the big corporations with their legal teams. It is not likely nor easy for an individual to be unfair to a corporation but it is very easy and as can be seen by the recent financial storms that it is both likely and easy for big time corporations to take advantage of the individual, before, during and after signing on the dot.
If our govt is sincere in looking after our interests, they should look into this and ensure that our interests are being protected instead of protecting the big time institutions in the name of wanting to promote Singapore as a financial hub. In the end, they may end up promoting a pirates hub.