What is a typical consequence of material misrepresentation found during underwriting?

What is a typical consequence of material misrepresentation found during underwriting?

• A. The policy can be rescinded or denied
• B. Premiums refunded
• C. Ratings adjusted
• D. Claims denied if misrepresentation is material

Answer: (A)

When underwriting, the insurer relies on truthful information to decide whether to issue a policy and at what terms. A material misrepresentation is a false statement about a fact that would have influenced that decision. If such a misrepresentation is found, the insurer can treat the contract as void from the start or deny coverage altogether. In practical terms, the policy is rescinded or denied, as if it never existed or never provided coverage. Premium refunds aren’t guaranteed and depend on policy terms and timing of rescission, while rating adjustments or post-issue changes aren’t the primary consequence of a material misrepresentation.

When underwriting, the insurer relies on truthful information to decide whether to issue a policy and at what terms. A material misrepresentation is a false statement about a fact that would have influenced that decision. If such a misrepresentation is found, the insurer can treat the contract as void from the start or deny coverage altogether. In practical terms, the policy is rescinded or denied, as if it never existed or never provided coverage. Premium refunds aren’t guaranteed and depend on policy terms and timing of rescission, while rating adjustments or post-issue changes aren’t the primary consequence of a material misrepresentation.