Regarding the contestability of a life insurance policy, which statement is true?

The correct statement regarding the contestability of a life insurance policy is that the policy can be contested by the insurer only during the first two years of the contract. This contestability period is a standard provision in life insurance policies, allowing insurers to investigate and potentially deny claims if there is evidence of misrepresentation or fraud on the part of the policyholder at the time of application.

During these first two years, the insurer has the right to review the policy and any information disclosed by the insured. If the insurer discovers inaccuracies or omissions in the application that could impact the risk assessment, they may contest the claim and deny benefits. After this period, the policy generally becomes uncontestable, meaning the insurer cannot challenge the validity of the policy based on misstatements made in the application, except in cases of fraud.

This provision protects both the insurer, ensuring they have the opportunity to assess risk accurately, and the insured, who can rely on the policy being valid after the contestability period has lapsed. As a result, knowing about the contestability period is crucial for policyholders in understanding their rights and the insurer's obligations.