A life insurance policy lapses and is later reinstated. Under California law, after reinstatement the insurer may contest the policy:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
CIC §10113.5 provides that upon reinstatement, a policy may be contested on account of fraud or misrepresentation of facts material to the reinstatement only for the same period following reinstatement, and with the same conditions and exceptions, as apply to contestability after original issue, generally two years. This means the insurer may investigate the statements made to obtain reinstatement, including proof of insurability, during a new contestable period. Contestability after reinstatement is limited to fraud or misrepresentation material to the reinstatement itself, not to the original application.
Why the other options are wrong
- Contestability after reinstatement is limited to fraud or misrepresentation material to the reinstatement for a defined period; it is not unlimited or indefinite. This answer describes a different situation from the one in the question and is therefore incorrect under the facts given here.
- Nonpayment of premiums is an exception to incontestability generally, but the reinstatement rule specifically concerns fraud or misrepresentation in obtaining the reinstatement. This choice does not fit the arrangement described in the question, so it is clearly not the right option to choose.
- Reinstatement does not eliminate contestability; it actually starts a new contestable window for fraud or misrepresentation that was material to the reinstatement. Accordingly, this option is not correct because it does not match the specific rule or product that is described in the question.
Memory hook
Reinstatement restarts a contestable clock for lies told to get it.