Arizona Life and Health Practice Exam

After how many years does an annuity become incontestable?

1. 1 year

2. 2 years

3. 3 years

4. 5 years

The correct answer is: 2 years

An annuity becomes incontestable after a period of two years, which means that the insurer cannot contest the validity of the contract based on misrepresentation or fraud in the application during that time. This two-year period is established to provide both the insurer and the policyholder some level of certainty and security, ensuring that consumers are not indefinitely subject to claims of misrepresentation after the policy has been in effect for a reasonable amount of time. This time frame is common in insurance contracts, as many states have laws that dictate this period to protect policyholders from the risk of losing their benefits due to issues that might have been overlooked during the underwriting process. After the two-year period, the contract is considered valid, and the insurer is obligated to honor the terms of the annuity.