California Life-Only & Accident and Health AgentCalifornia Law - Life and Accident & HealthEasy
A health insurance policy in California contains a provision that states the insurer cannot contest the policy after it has been in force for a certain period, even if there was an unintentional misstatement on the application. What is this provision known as?
- AGrace Period
- BIncontestable Clause
- CReinstatement Clause
- DEntire Contract Provision
Show answer & explanationAnswer & explanation
Correct answer: B. Incontestable Clause
The incontestable clause prevents an insurer from voiding a policy due to misstatements in the application after a specified period, typically two years, except in cases of fraudulent misrepresentation.
Why the other options are wrong
- A. A grace period allows a policyholder to pay a premium after the due date without losing coverage.
- C. A reinstatement clause allows a lapsed policy to be restored to active status.
- D. The entire contract provision states that the policy and application constitute the entire agreement.
Incontestable Clause (A&H)
A provision in a health insurance policy that prohibits the insurer from voiding the policy due to misstatements in the application after it has been in force for a specified period, usually two years, except for fraudulent misstatements.
- Limits insurer's contestability rights
- Typically 2 years in California
- Does not apply to fraudulent misstatements
Memory trick: The 'Incontestable Shield' protects policyholders after time, making it hard for insurers to 'Yield'.