California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthEasy
A health insurance policy includes a provision that states the insurer cannot contest the policy after it has been in force for a certain period, typically two years, even if there was a material misstatement on the application. This provision is known as the:
- AReinstatement Clause
- BIncontestable Clause
- CFree Look Period
- DGrace Period
Show answer & explanationAnswer & explanation
Correct answer: B. Incontestable Clause
The incontestable clause is a mandatory provision in most insurance policies, including health, which prevents the insurer from denying a claim or voiding the policy due to misstatements in the application after a specified period (usually two years), except for fraudulent misstatements.
Why the other options are wrong
- A. Reinstatement clause outlines how a lapsed policy can be brought back into force.
- C. Free look period allows the policyowner to return the policy for a full refund shortly after purchase.
- D. Grace period allows payment of overdue premiums without policy lapse.
Incontestable Clause
A policy provision limiting the insurer's right to deny claims or void the policy due to misstatements in the application after a certain period (e.g., 2 years).
- Protects policyholders from future challenges.
- Does not apply to fraudulent misstatements in some jurisdictions (or indefinitely for fraud in CA).
- Typically 2 years for life and health policies.
Memory trick: Clauses protect over time.