Arizona Life and Health Practice Exam

During which period can a life insurance policy be contested by the insurer?

1. One year

2. Two years

3. Three years

4. Five years

The correct answer is: Two years

The correct answer is two years. In the context of life insurance policies, this two-year period is often referred to as the "contestability period." During this time, the insurer has the right to investigate and potentially contest the validity of the policy if there is evidence of misrepresentation or fraud in the application. The significance of this two-year timeframe lies in the balance it strikes between protecting the insurer from fraud and ensuring that the policyholder has a degree of security once they have held the policy for a sufficient duration. After the two-year contestability period ends, the insurer typically cannot deny a claim based on misstatements made in the application, unless those misstatements were related to the applicant's age or if the insured person committed fraud. This period is not shorter or longer than two years in most jurisdictions, making it a common standard in the insurance industry. Hence, understanding the contestability period is crucial for both policyholders and insurers in managing expectations regarding claims and the potential for policy disputes.