California Life-Only & Accident and Health AgentAccident and Health InsuranceMedium
A health insurance policy includes a provision that states the policy cannot be contested by the insurer after it has been in force for two years, except for fraudulent misstatements. What is this provision known as?
- AGrace Period
- BIncontestability Clause
- CTime Limit on Certain Defenses
- DReinstatement
Show answer & explanationAnswer & explanation
Correct answer: B. Incontestability Clause
The incontestability clause prevents the insurer from denying a claim or voiding a policy due to misstatements in the application after the policy has been in force for a specific period (usually two years), except in cases of fraud.
Why the other options are wrong
- A. Grace period allows a policyholder extra time to pay premiums before policy lapse.
- C. Time Limit on Certain Defenses is another term for the incontestability clause, but 'Incontestability Clause' is the more common and direct answer in this context.
- D. Reinstatement allows a lapsed policy to be put back in force.
Incontestability Clause
A health insurance policy provision that prevents the insurer from challenging the validity of the policy due to misstatements in the application after the policy has been in force for a specified period (typically two years), except in cases of fraudulent misstatements.
- Protects policyholders from insurer challenges.
- Usually a two-year period.
- Fraud is an exception to this clause.
Memory trick: GRACEful REINSTATEMENT INCONTESTABLY LIMITS actions.