When is a policy considered voidable?

A policy is considered voidable when a party lacks mental competence at the time of purchase. In such cases, the individual may not have fully understood the implications of entering into a contract, which undermines the validity of their consent. This lack of competence can arise due to various conditions such as mental illness, intoxication, or cognitive impairment. When a policy is voidable on these grounds, the aggrieved party has the right to affirm or rescind the contract once they regain competence or upon gaining awareness of their impairment.

The other options present situations that do not necessarily result in a voidable policy. For instance, neglecting to pay the premium might lead to a lapse in coverage but does not inherently make the policy voidable. Similarly, a policy failing to meet legal requirements typically leads to it being void from the outset, rather than voidable. Lastly, suffering a loss before coverage begins means the policy is not in effect, but it does not affect its validity based on issues of mental competence at the time of purchase.