State RegulationsNC specificDifficulty 2/5
A North Carolina life policy has been in force for more than two years. The insurer now wants to contest the policy based on misstatements the insured made in the application about the insured's health. What may the insurer do?
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Answer & full 3-part explanation (select an option above, or peek)
Why D is correct
Under G.S. 58-58-22(2), a life policy may not be contested after two years from its date of issue except for nonpayment of premium. Likewise, statements about the insured's insurability become unusable after two years during the insured's lifetime. After the two-year mark, the misstatements described cannot support a contest.
Why the other options are wrong
- A) Rescission for material misstatement is barred once two years have passed; only nonpayment of premium survives the incontestability period.
- B) The incontestability clock runs from issue whether or not the insured dies; death does not extend or revive the right to contest.
- C) During the insured's lifetime, statements become unusable after two years, so a lifetime contest right does not exist.
Memory hook
After two years, only nonpayment can sink the policy.