State RegulationsVA specificDifficulty 2/5
A life policy in Virginia has passed its contestability period. The insurer discovers the policyowner stopped paying premiums and the policy has lapsed. Under Va. Code § 38.2-3305, what is the insurer's position?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Va. Code § 38.2-3305 makes a life policy incontestable after 2 years except for nonpayment of premium. That exception survives the passage of the contestability period: a policy that has lapsed for unpaid premiums provides no death benefit regardless of how long the policy previously ran. Incontestability protects honest applicants from old misstatements; it was never meant to force insurers to pay claims on policies whose premiums stopped.
Why the other options are wrong
- B) The statute expressly excepts nonpayment of premium from the contestability bar, so the insurer may rely on the lapse.
- C) Reinstatement under Va. Code § 38.2-3311 is the policyowner's option, not a precondition to the insurer's defense on nonpayment.
- D) The exception for nonpayment is not time-limited in that way; it applies whenever premiums go unpaid.
Memory hook
Incontestability forgives misstatements, never missed premiums.