Under what condition can an insurer typically contest a life insurance policy?

An insurer can typically contest a life insurance policy within the first two years of the contract based on the principle of the "contestability period." This period allows insurers to investigate claims made during that timeframe to ensure that the information provided in the application is accurate and complete. If a policyholder fails to disclose pertinent information or misrepresents their health status, the insurer has the right to deny a claim or rescind the policy within this two-year window.

During these initial years, the insurer is still verifying the risk they agreed to cover based on the applicant's representations. After this period, the policy generally becomes incontestable, meaning the insurer cannot reject claims based on misstatements or omissions unless there is evidence of fraud. This rule is designed to protect policyholders from being denied coverage after having maintained their policies for a reasonable period.

Options regarding failure to pay premiums pertain to policy lapses rather than contestability, while changes in health after the policy issue do not typically affect the terms unless misrepresentation occurred during application. Lastly, questionable information on the application is only contestable within the initial two years, so beyond that, the insurer must honor the contract as long as premium payments were made.