New York Insurance Exam Practice Question
What is the purpose of a policy's incontestability clause?
Correct Answer: B
Rationale: The incontestability clause serves to limit the insurer's ability to contest claims after a specific period, typically two years. This provides policyholders with security, ensuring that once the period has elapsed, the insurer cannot deny a claim based on misstatements or errors in the application.
Option A is incorrect as the clause does not waive premiums; premium payments remain the policyholder's responsibility. Option C is misleading because the clause does not increase the death benefit; it solely addresses contestability. Option D is also wrong; the clause does not grant the insurer the right to cancel the policy.
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