Incontestability Clause in Australia: 2025 Guide for Life Insurance

When you take out a life insurance policy, the last thing you want is uncertainty about whether your loved ones will be paid out when they need it most. That’s where the incontestability clause comes in—a provision designed to give Australians peace of mind. As the insurance landscape evolves in 2025, understanding this clause is essential for anyone looking to protect their family’s financial future.

What Is an Incontestability Clause?

The incontestability clause is a standard feature in most Australian life insurance policies. It means that after a specified period—typically two years from the policy’s start date—the insurer can no longer void the policy or deny a claim due to misstatements or omissions made by the policyholder, except in cases of outright fraud. This legal safeguard is enshrined in the Life Insurance Act 1995 and reinforced by recent reforms in 2025 aimed at increasing consumer confidence.

• Timeframe: Most policies specify a two-year contestability window.

• Scope: Applies to unintentional misstatements, not deliberate fraud.

• Coverage: Life, TPD, and some income protection policies include this clause.

For example, if you forgot to mention a minor surgery during your application but it wasn’t deliberate, your insurer cannot use that to deny a payout after two years have passed.

Recent Policy Updates: 2025 Changes

In 2025, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) introduced new guidelines to clarify the application of the incontestability clause. Key updates include:

• Enhanced consumer protections: Insurers must now provide clearer disclosures about contestability periods and what constitutes fraud.

• Standardisation: All retail life insurers are required to use the same two-year contestability period, reducing confusion for policyholders shopping around.

• Dispute resolution: ASIC has streamlined the process for consumers to challenge denied claims, with the Financial Complaints Authority seeing increased jurisdiction over contestability-related disputes.

These changes mean Australians can now rely more heavily on the incontestability clause, knowing that their rights are protected and that the process for resolving disputes is more transparent and accessible.

Why the Incontestability Clause Matters for Australian Families

The clause is especially relevant in an era where digital applications and medical records are the norm. Minor errors or omissions in online forms can happen easily, but with this clause, your family’s financial security isn’t left hanging in the balance years down the track.

Consider these real-world implications:

• Peace of mind: You can be confident that genuine mistakes made during application won’t threaten your policy later.

• Claims certainty: After two years, the insurer generally can’t contest the policy on the grounds of misrepresentation—unless there’s evidence of fraud.

• Fairness: The clause balances the insurer’s need for accurate information with the consumer’s right to claim security.

One Sydney family recently won a claim dispute after a typo on their original application was discovered—thanks to the incontestability clause, the insurer paid out without further challenge.

Limitations and How to Make the Most of the Clause

While the incontestability clause offers strong protection, it’s not a free pass for dishonesty. Insurers can still void a policy if they can prove you intentionally lied or withheld crucial information. To make the most of the clause:

• Be truthful and thorough: Always answer application questions honestly, even if you think an issue is minor.

• Keep records: Save copies of your application and any correspondence with your insurer.

• Review annually: Update your insurer if your circumstances change and check that your policy details remain accurate.

These steps not only protect your rights under the incontestability clause but also ensure your family isn’t left exposed at claim time.