Florida 2-15 Life, Health and Variable Annuity AgentFlorida Laws and Regulations Specific to Life Insurance and AnnuitiesEasy
A Florida agent is explaining the policy provisions of a life insurance contract to a new client. The client asks about the incontestability clause. Which of the following statements accurately describes the purpose of this clause?
- AIt guarantees that the policy will pay a dividend to the policyowner each year.
- BIt prevents the insurer from denying a claim due to misstatements after a specified period, usually two years.
- CIt allows the insurer to contest the policy at any time if fraud is discovered.
- DIt permits the policyowner to make changes to the beneficiary designation without insurer approval.
Show answer & explanationAnswer & explanation
Correct answer: B. It prevents the insurer from denying a claim due to misstatements after a specified period, usually two years.
The incontestability clause states that after a policy has been in force for a certain period (usually two years in Florida), the insurer cannot contest the validity of the policy due to misstatements made in the application, even if they were material.
Why the other options are wrong
- A. This relates to participating policies and dividends, not incontestability.
- C. This is incorrect; the clause limits contestability after a period.
- D. This describes a change of beneficiary provision, not the incontestability clause.
Incontestability Clause
A life insurance policy provision that prevents the insurer from denying a claim due to misstatements on the application after the policy has been in force for a specific period (typically two years).
- Protects insured from post-claim investigations
- Usually a 2-year period
- Applies to misstatements, not fraud in some cases
- Mandatory provision in life insurance
Memory trick: After two years, the insurer can't Contest, so the policy is a lock!