Arkansas Life and Health Insurance Practice Exam

Under a life insurance policy, the incontestability clause prevents the insurer from:

1. Declaring the policy void after a contestable period due to misrepresentations

2. Denying benefits if the insured commits suicide after the policy is issued

3. Increasing the premium during a specific period

4. Refusing a loan against the policy’s cash value

The correct answer is: Declaring the policy void after a contestable period due to misrepresentations

The correct answer is A. The incontestability clause in a life insurance policy prevents the insurer from declaring the policy void after a contestable period due to misrepresentations made by the insured on the application. This clause provides protection to the policyholder by limiting the amount of time an insurance company can challenge the validity of the policy based on misstatements or omissions made by the insured during the application process. Options B, C, and D are incorrect because they are not related to the incontestability clause. Option B deals with suicide provisions in life insurance policies, option C relates to premium increases which may be subject to policy terms and state regulations, and option D concerns the ability to refuse a loan against the policy's cash value, which is not typically governed by the incontestability clause.