Rescission of life insurance policy during contestability period
Insurance companies routinely try to find a reason to rescind a policy. The reason rescission is a favorite tactic is because it is so powerful. Why fight over whether a particular claim is covered if the insurance company can simply obtain a finding that the entire policy never existed?
Generally a life insurance company can rescind a policy purchased within two years of the insured's death if it proves the application contained a misrepresentation. However, under the Texas Insurance Code, it must be shown that such misrepresentation: