Arizona Life and Health Practice Exam

Which of the following represents a scenario limiting contact in life insurance policies?

1. Lapsing a policy

2. Contesting for two years

3. Renewing a policy

4. Assigning benefits to a third party

The correct answer is: Contesting for two years

The scenario that represents a limitation on contact in life insurance policies involves the contestability period of two years. During this time, insurers have the right to investigate and deny claims based on misstatements made by the policyholder. If a policyholder attempts to make a claim within this two-year period, the insurer can contest the claim for any discrepancies or issues revealed upon review. This effectively limits contact because it establishes a time frame during which the insurer is scrutinizing claims more rigorously and can deny them based on the initial application. In contrast, lapsing a policy refers to a status where the policy is no longer active due to non-payment but does not inherently limit contact regarding claims once the policy is reinstated or if you're trying to appeal a claim. Renewing a policy pertains to extending coverage and usually allows for continued interaction rather than limitation. Assigning benefits to a third party is a process that entails transferring the benefits of a life insurance policy but does not impose limits on contact; rather, it alters who receives the benefits without affecting the insurer's engagement with the original policyholder.