Two years after a California life insurance policy is issued, the insurer discovers that the insured deliberately concealed a serious heart condition on the application. The insured then dies of unrelated causes. What is the insurer's remedy under the incontestability clause?
Explanation
California Insurance Code §10113.5 requires every life policy to be incontestable after it has been in force during the lifetime of the insured for 2 years from the date of issue, EXCEPT for nonpayment of premium. Once the 2-year contestable period expires, the insurer cannot rescind for misrepresentation or even concealment — the death benefit must be paid. The 2-year window balances insurer protection against ongoing fraud risk to consumers. Option A applies only WITHIN the 2-year period. Option C is the wrong remedy (misstatement-of-age adjusts face amount, not for concealment of health). Option D is incorrect under California law — even fraudulent concealment generally cannot be raised after 2 years in life insurance (a key California consumer protection, contrasting with general contract-fraud rules).
Law Reference: Cal. Ins. Code §10113.5 (incontestability)Practice all 315 questions free — no signup required.
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