AD Banker Comprehensive Practice Exam

Under what condition can an insurer deny a claim under a long-term care insurance policy due to misrepresentation?

1. None of the answers listed

2. If the policy has been in force for less than 3 months

3. Anytime they desire

4. If the policy has been in force for less than 6 months

The correct answer is: If the policy has been in force for less than 6 months

A long-term care insurance policy may be denied based on misrepresentation when the policy has been in force for less than six months. Insurers typically have a period known as a contestability period in which they can review claims and potentially deny them if they discover that the insured misrepresented information on their application. This misrepresentation must relate to material facts that could influence the insurer's decision regarding coverage. In many states, this contestability period is specifically set at six months for long-term care insurance, meaning that if a claim is filed within this timeframe and it's found that the insured provided inaccurate information, the insurer can use that misrepresentation as grounds to deny the claim. After this period, the insurance company generally cannot deny a claim for misrepresentation unless fraud is established. This concept is rooted in the principle of protecting consumers, whereby after a certain duration of the policy being in effect, they are assumed to have established validity in their coverage, barring fraudulent activity.