State RegulationsMI specificDifficulty 2/5
An insurer discovers a material misstatement in the application 3 years after issuing an individual life policy, and the policyowner has since stopped paying premiums. Under Michigan law, which defenses remain available to the insurer?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
M.C.L. 500.4014 makes the policy incontestable after 2 years from the policy date, so the misstatement — discovered 3 years after issue — can no longer be raised as a defense. The exception for non-payment of premium survives, however, so the insurer may still deny benefits for premiums left unpaid. Incontestability bars misstatement defenses, not payment defaults.
Why the other options are wrong
- B) The contestable period runs from the policy date, not from discovery; after 2 years the misstatement defense is gone.
- C) The misstatement defense expired at 2 years; only the non-payment defense remains available.
- D) Incontestability does not forgive unpaid premiums; non-payment remains an express exception under M.C.L. 500.4014.
Memory hook
After 2 years: lies are forgiven, unpaid premiums are not.