New Jersey Life and Health State Practice Exam

What type of insurance policy is likely to have a low risk of being contested by the insurer?

1. Term life insurance

2. Whole life insurance

3. Guaranteed issue insurance

4. Universal life insurance

The correct answer is: Guaranteed issue insurance

Guaranteed issue insurance is designed for individuals who may have difficulties obtaining coverage due to health issues. This type of policy does not require the applicant to undergo a medical examination or provide detailed health information, which means that insurers are less likely to contest the policy after it has been issued. Because of its nature, guaranteed issue insurance often comes with a simplified application process and fixed premiums, making it a reliable option for those seeking life insurance without the fear of contestability. In contrast, term life insurance, whole life insurance, and universal life insurance policies typically involve underwriting processes that assess the applicant's health and risk factors. These assessments can result in policies being contested if discrepancies are found later, making them more susceptible to contestation than guaranteed issue policies.