State RegulationsNC specificDifficulty 2/5
A Raleigh applicant overstates his income on a life insurance application. Under North Carolina law, what is the legal effect of a misstatement in the application?
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Answer & full 3-part explanation (select an option above, or peek)
Why B is correct
Under G.S. 58-3-10, statements in a North Carolina insurance application are representations, not warranties, and a misstatement avoids the policy only if it is fraudulent or material to the risk. The practical consequence is that an innocent or immaterial misstatement does not defeat coverage, so insurers must show fraud or materiality before rescinding.
Why the other options are wrong
- A is wrong because G.S. 58-3-10 expressly rejects the warranty approach: application statements are representations, not warranties, so they do not automatically void coverage.
- C is wrong because North Carolina law does not require automatic rescission; the insurer must demonstrate that the misstatement was fraudulent or material.
- D is wrong because equitable adjustment of benefits is the remedy for misstatement of age or gender under G.S. 58-58-22(3), not the general rule for misstatements in the application.
Memory hook
NC statements are representations, not warranties - only fraud or materiality hurts the policy.