More than 2 years after an individual major medical policy was issued in North Carolina, the insurer discovers the insured understated a health condition on the application. The misstatement was negligent but not fraudulent, and the policy provides benefits of at least $5,000. May the insurer void the policy or deny the claim based on the misstatement?

Why C is correct

G.S. 58-51-15(a)(2)a generally bars the use of misstatements to void coverage or deny claims after 2 years from issue or reinstatement, except for fraud — but the statute carves out major medical and major/catastrophe hospitalization policies with benefits of at least $5,000, disability income policies of at least $100 per month for at least 12 months, and franchise policies. Because this major medical policy meets the benefit threshold, the insurer may raise the non-fraudulent misstatement even after 2 years.

Why the other options are wrong

• A) The blanket 2-year protection does not reach this policy: major medical coverage with benefits of at least $5,000 is an express exception.
• B) Overstated and wrong in mechanism — the exception applies to specified policy categories after the 2-year mark, not to unlimited challenges at any time, and fraud remains the only general carve-out.
• D) Nothing in the statute conditions the exception on a premium refund; the insurer may simply rely on the carve-out for major medical policies.

Memory hook

Big policies lose the 2-year shield: $5,000+ major medical is fair game.