The Cigar Question and Two Families

Step 1 - Is the insurer still in the contestable period? The incontestability clause bars contest after two years from issue. Death at 20 months is inside the window, so the answer is yes, Summit may contest.

Step 2 - Was there a misrepresentation of a material fact? Two candidates: the tobacco answer and the undisclosed 2014 COPD diagnosis. Materiality is tested by whether the truth would have changed the underwriting decision - a 54-year-old with COPD and nicotine use would very likely have been declined or rated substandard. That is a strong materiality case, and the COPD omission is the stronger of the two because it does not depend on whether cigars count as "tobacco use."

Step 3 - What is the remedy in this state? Most states: rescind, refund premiums paid, and pay nothing else. A minority allow a rated or proportional benefit. A few permit rescission for fraud even after two years.

Step 4 - Any defenses the beneficiary can raise? The agent heard about the cigars and kept it off the application. Some courts impute the agent's knowledge to the insurer under waiver or estoppel, which could neutralize the tobacco issue - another reason to lead with COPD. The applicant's signature also attests to the answers, so "I didn't read it" defeats materiality but may still affect whether the misstatement was innocent or fraudulent.

Bottom line. Rescind and tender premiums, but expect litigation and build the file around the COPD omission, not the cigars.

The designation controls, not the will. A named beneficiary takes outside probate; the 2018 will leaving everything to the second wife has no effect on these proceeds.

"My children, equally" is a class designation. The class is determined at the insured's death, so all three children - including the minor - share equally: $250,000 each. Children born after the designation would generally be included; a stepchild would generally not be, absent adoption.

The minor's share cannot simply be handed over. Options:

• Court-appointed guardian or conservator - slow and expensive, with ongoing accounting.
• A UTMA/custodial account under state law - simpler, but the child controls the money at the state's age of majority.
• The insurer's facility-of-payment clause - usually capped at a few thousand dollars, so it does not solve a $250,000 share.
• Court-approved settlement to a guardian ad litem.

Prevention. While living, Marcus should have named a trust or a custodial arrangement for the minor, or at minimum specified percentages. A class designation with a minor in the class guarantees delay in exactly the situation the policy exists to address.

Yes - decisively. Once two years run from issue, the incontestability clause bars the insurer from contesting the policy for misrepresentation, including the COPD omission. In most states that holds even where the misstatement was intentional; only a handful of states carve fraud out. The full $750,000 is payable.

What survives. A well-drafted clause typically preserves two exceptions:

• Nonpayment of premium - the policy can still lapse and be contested on that ground.
• Misstatement of age or sex - handled by adjusting the benefit to what the premium would have purchased at the correct age, not by rescission. Note this exception covers age and sex, not health history, so a rated-to-standard error in health underwriting is not corrected after two years.

Underwriting lesson. The insurer's only real protection is at issue. After month 24 the mortality risk from an undisclosed condition sits with the carrier, so inspection of the agent's notes, prescription database checks, and attentive underwriting are the whole defense.