State RegulationsAZ specificDifficulty 3/5
An Arizona insurer discovers, after the two-year contestable period has run, that an insured's age was misstated on a life application; a death claim is now pending. What is the insurer's obligation?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
A.R.S. 20-1206 requires an equitable adjustment for misstatement of age: the proceeds are the amount the premiums would have purchased at the correct age. The incontestability bar of A.R.S. 20-1204 stops a contest for misstatement, but age is corrected rather than contested, so the claim is paid in the adjusted amount.
Why the other options are wrong
- A) After the contestable period, misstatement cannot support denial; age is subject to adjustment instead.
- B) Voiding the policy for age misstatement is contrary to A.R.S. 20-1206, which mandates adjustment.
- C) The contestable period does not force payment of the full face amount when age was misstated.
Memory hook
Incontestable does not mean full-face: adjust the age, pay the adjusted sum.