State RegulationsAZ specificDifficulty 2/5
Three years after issuing a life policy delivered in Phoenix, an insurer discovers a material misstatement in the application and wants to contest the policy. Under A.R.S. 20-1204, the insurer may:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
A.R.S. 20-1204 limits the contestable period for an Arizona life policy to two years from issue, with nonpayment of premiums as the sole exception. By the third policy year the window has closed, so the insurer cannot rescind or deny based on the application misstatement even though it was material. The beneficiary's knowledge is irrelevant to whether the statutory contest period has run.
Why the other options are wrong
- B) Arizona law fixes the contest period at two years, not five; a longer materiality-based window contradicts A.R.S. 20-1204.
- C) Returning premiums does not reopen a closed contest period; the two-year limit is absolute except for nonpayment.
- D) The statute conditions contestability on time, not on the beneficiary's knowledge, so this alleged condition has no legal effect.
Memory hook
Miss the two-year window and the misstatement dies with it — only nonpayment lives on.