Primerica Life Producer Practice Test

If an insurer discovers that an insured concealed information during the application process, what action can they take if the insured died years later?

1. Void the policy

2. Pay the death benefit

3. Offer a reduced benefit

4. Reinstate the policy

The correct answer is: Pay the death benefit

In the context of an insurer discovering that an insured concealed information during the application process, it is important to note how the law handles such situations regarding the validity of the life insurance policy. After a period, typically two years post-issuance, insurance contracts become more difficult for insurers to contest; this is often referred to as the "incontestability clause." If an insured dies years after the policy has been issued and the contestability period has elapsed, the insurer is generally required to pay the death benefit regardless of any concealed information that may have been disclosed during the application process. This means that even if the insurer discovers that the insured withheld critical information, if the policy has been in force for a sufficient length of time, the insurer must honor the terms of the contract and pay the death benefit to the beneficiaries. This is rooted in the principle that, after the contestability period, insured parties have a certain level of assurance that the policy will remain in force, thereby protecting the insured's beneficiaries. The contract's sanctity is upheld to provide reliability and peace of mind for those purchasing life insurance. Therefore, given the scenario where the insured has died years later, the most accurate and enforceable action under the conditions stated is for the insurer to pay