What happens if an insured who concealed information dies within 2 years of purchasing a policy?

When an insured dies within a two-year period following the purchase of a life insurance policy and it is later discovered that they concealed information during the application process, the insurer typically has specific rights based on the circumstances of the concealment. In many jurisdictions, if the incorrect or omitted information is not considered material to the risk taken on by the insurer, the death benefit will still be paid out.

The rationale for this is that some states have laws protecting policyholders who may have unintentionally misrepresented information, especially if the insurer did not specifically ask about certain issues or health conditions. In many cases, insurers must demonstrate that the concealment directly impacted their decision to issue the policy or the terms of coverage. If the concealed information does not meet the threshold of materiality, the insured's beneficiaries will receive the full death benefit.

The two-year contestability period is a significant clause in life insurance policies, as it allows insurers to investigate claims for potential misrepresentations. However, this does not mean that all claims can be denied outright; it heavily depends on the context and content of the concealed information. If the insurer cannot prove that the concealment was material, then the death benefit is generally payable to the beneficiaries regardless of the concealment.