State RegulationsNC specificDifficulty 2/5
An applicant makes an innocent, nonfraudulent misstatement about her family's health history in an insurance application, and the misstatement is not material to the risk. What is the effect on the policy?
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Answer & full 3-part explanation (select an option above, or peek)
Why C is correct
Under G.S. 58-3-10, statements in an insurance application are representations, not warranties, and a misstatement avoids the policy only if it is fraudulent or material to the risk. An honest, immaterial misstatement therefore does not defeat coverage, which protects consumers from technical policy denials based on innocent errors.
Why the other options are wrong
- A) Automatic avoidance would require the misstatement to be material or fraudulent; an innocent, immaterial error does not void the policy.
- B) The two-year contestability concept concerns the insurer's window to contest material or fraudulent statements, not an automatic cancellation right for innocent ones.
- D) North Carolina law expressly rejects treating application statements as warranties under G.S. 58-3-10.
Memory hook
Representations, not warranties - only fraud or materiality breaks the policy.