Tennessee Insurance Practice Exam

What is required for a policy to be voided due to misrepresentation?

1. Discovery after two years

2. Discovery during the Contestable period and proven material

3. Discovery at any time by the insurer

4. Discovery when premiums are unpaid

The correct answer is: Discovery during the Contestable period and proven material

For a policy to be voided due to misrepresentation, it is essential that the misrepresentation be discovered during the contestable period and that it be proven material. The contestable period typically lasts for the first two years of the policy, during which the insurer has the right to investigate and potentially deny claims based on misrepresentation or concealment. The reason this answer is correct lies in the nature of insurance contracts and how misrepresentations influence risk assessment. Material misrepresentation significantly alters the insurer's understanding of the risk involved and may lead them to issue a policy that they would not have otherwise approved. Therefore, if the insurer discovers the misrepresentation within this period, they can demonstrate that the incorrect information provided by the insured was indeed material to the policy's issuance. The emphasis on the contestable period is critical because once this period expires, insurers typically cannot deny claims based on misrepresentation unless it involves fraud. This highlights the importance of the timing of the discovery. Other choices do not align with the requirements for voiding a policy due to misrepresentation. For instance, discovering misrepresentation at any time, such as when premiums are unpaid, does not guarantee that the policy can be voided unless it falls within the stipulated contestable period and proves to