Life insurance - indisputable clause

A life insurance policy is likely to have an indisputability clause. This clause states that the insurance company will not dispute any claim after it has been in force for one or two years, except in the case of fraud.

The purpose of this clause is to protect the consumer (i.e. policyholder) from unreasonable rejection of a death claim due to non-disclosure of material information. After a policy has been issued for a few years, it will be difficult to establish if the non-disclosure is intended or an oversight. The indisputability clause states that the insurance company will not dispute the claim on this account.

The claim can be disputed if the premium is not paid.

Some claim offiicers are willing to dispute a claim under the "fraud" clause. They claim that policyholder is commiting fraud by the non-disclosure. This stand is in contraction to the indisputablity clause.

If the insurance company wish to use the fraud clause, they have the burden to prove that fraud was intended by the policyholder. The non-disclosure event does not amount to fraud. Other evidence had to be produced, e.g. that the policyholder knew about the duty to disclose and take steps to hide the facts. This type of evidence is usually not available, probably because fraud was not intended in the first place.

I hope that insurance companies are aware about the intent of the indisputability clause to protect the consumers from unreasonable rejection of claim on weak grounds. If such a case is challenged in court, it is likely that the insurance company is not able to prove the intent to commit a fraud, and that the claim will be paid.

Tan Kin Lian