State RegulationsMI specificDifficulty 3/5
A Michigan insurer reviewing a claim finds both a misstatement of the insured's age and a material misrepresentation about the insured's health in the application, within 2 years of the policy date. How are the two handled differently?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Michigan treats the two defects differently. M.C.L. 500.4018 requires an age or gender misstatement to be corrected by adjusting the benefit to what the premium paid would have purchased — the policy is never voided for it. A material misrepresentation about health, by contrast, is a ground to contest the policy under M.C.L. 500.4014, but only within the 2-year contestability window that is still open here.
Why the other options are wrong
- A) Adjusting the benefit is the remedy only for age or gender misstatements; a material health misrepresentation is a contest ground, not an adjustment item.
- C) Rescission at any time is wrong on both counts: age misstatements never void the policy, and health misrepresentations are contestable only within 2 years.
- D) The 2-year contestability window is still open, so the health misrepresentation can be raised on the pending claim.
Memory hook
Age adjusts the benefit; fraud contests it — only for 2 years.