State RegulationsAZ specificDifficulty 2/5
An Arizona life policy has been in force for more than two years when the insurer discovers a material misstatement made in the application. Under A.R.S. 20-1204, what may the insurer do?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
A.R.S. 20-1204 bars contest after the policy has been in force for two years during the insured's lifetime, except for nonpayment of premiums. Late discovery does not reopen the window, so the insurer must honor the policy despite the misstatement.
Why the other options are wrong
- A) Rescission for material misstatement is barred once the two-year contestable period has run.
- B) Proportional reduction is not the remedy here; the age-misstatement adjustment under A.R.S. 20-1206 applies only to age.
- D) The statute creates no discovery-based 90-day window; the period runs from issue.
Memory hook
Late discovery, closed window - only nonpayment survives.