Florida 2-15 Life, Health and Variable Annuity AgentGeneral Knowledge of Life InsuranceMedium
A life insurance policy states that the insurer will pay the death benefit even if the insured made a material misrepresentation on the application, provided the policy has been in force for more than two years. This is an example of which policy provision?
- AEntire Contract Provision
- BGrace Period
- CReinstatement Provision
- DIncontestability Clause
Show answer & explanationAnswer & explanation
Correct answer: D. Incontestability Clause
The Incontestability Clause states that after a policy has been in force for a specific period (usually two years), the insurer cannot contest the validity of the policy or deny claims due to misstatements made by the insured on the application, even if they were material.
Why the other options are wrong
- A. The Entire Contract Provision states that the policy and a copy of the application constitute the entire agreement, preventing the insurer from referencing other documents.
- B. The Grace Period allows extra time to pay premiums, unrelated to misrepresentations.
- C. The Reinstatement Provision allows a lapsed policy to be put back in force, not about contesting claims.
Incontestability Clause
A life insurance policy provision that prevents the insurer from denying a claim due to misstatements or fraud in the application after the policy has been in force for a specific period, usually two years.
- Typically a 2-year period from policy issue date
- Protects policyholders from claims being denied years later for minor errors
- Does not apply to non-payment of premiums
- Does not apply if the policy was obtained with intent to murder
Memory trick: After two years, the policy is 'Incontestable' – no more fighting!