After the 2-year contestable period, what limitation is placed on insurers regarding material misrepresentation?

The selected answer is accurate because, after the 2-year contestable period of a life insurance policy, insurers are generally prohibited from contesting the validity of the policy due to any material misrepresentation made by the policyholder at the time of application. This means that if a policyholder misrepresented any information—such as health status or lifestyle habits—within the application, the insurer cannot use that misrepresentation as a basis to deny a claim or rescind the policy once the 2-year period has passed, regardless of the significance of the misrepresentation.

This provision is designed to provide stability and assurance to policyholders, allowing them to rely on the promises made by the insurer without the fear of future contestation for known misrepresentations that occurred during the application process. Therefore, the policy is considered binding and the insurer is obligated to honor it, reinforcing the principle that once the contestable period ends, the policyholder's rights are protected.

In contrast, the other options do not align with this principle: an insurer cannot contest a policy at any time after the contestable period has elapsed, they are not required to notify the policyholder of any misrepresentation after the two years, and they are not obligated to pay claims without regard to misrepresentation