Under Time Limit on Certain Defenses/Incontestable, which statement about fraudulent misstatements is true?

• A. Fraudulent misstatements are ignored after two years.
• B. Fraudulent misstatements always prevent any denial, regardless of time.
• C. Fraudulent misstatements are treated the same as non-fraudulent misstatements.
• D. After two years, the insurer cannot deny or reduce a claim based on a material misrepresentation unless the misstatement was fraudulent.

Answer: (D)

Time Limit on Certain Defenses (incontestable) protects the insured after the policy has been in force for a set period. Once two years pass, the insurer generally cannot deny or reduce a claim based on a misrepresentation in the application if it wasn’t fraudulent. The only exception is fraud: if the misstatement was fraudulent and material to the risk, the insurer can still deny or adjust the claim. That’s why the true statement is that after two years, the insurer cannot deny or reduce a claim based on a material misrepresentation unless the misstatement was fraudulent. The other choices misstate the rule by either claiming all fraudulent misstatements are ignored, claiming fraud always blocks denial, or claiming misstatements are treated the same regardless of fraud.