What happens to a health insurance policy after two years regarding misstatements made in the application?

The correct answer focuses on the concept known as the "incontestability clause," which is common in health insurance policies. After a period of two years from the issuance of the policy, the insurer typically cannot void the policy based on misstatements made in the application, unless those misstatements are determined to be fraudulent.

This is designed to protect policyholders from the risk of having their coverage unexpectedly terminated due to an innocent error or misstatement on their application, which is especially important in health insurance where coverage is critical for access to medical care. If a misstatement is made but is not fraudulent, the policy generally remains valid even if the insurer later discovers the misstatement during the two-year period, as long as the policyholder acted in good faith.

This two-year period helps provide stability for policyholders, allowing them to rely on their insurance protection without fear of cancellations due to minor inaccuracies. Thus, only instances of fraud, which involve intentional deceit, can lead to the voiding of a policy even after the two-year contestability period has ended. This distinguishes it clearly from other misstatements that may not have been made with intent to deceive.