What happens if an insured materially misrepresents information on an application or claim?

• A. The policy automatically renews.
• B. The insurer may void the policy or deny the claim.
• C. The insured must pay a higher premium.
• D. The claim is automatically paid.

Answer: (B)

Material misrepresentation on an application or claim means a false statement of a fact that would have affected the insurer’s decision to issue the policy or to pay a claim. When facts are misstated in a way that changes the risk the insurer is taking on, the contract can be considered voidable. The insurer has grounds to void the policy from the start or to deny a claim because the basis for coverage relied on those disclosures is no longer true. This is true whether the misrepresentation is found on the application or arises in a claim situation. In short, if the misrepresentation is material—meaning it would have changed underwriting, pricing, or coverage decisions—the insurer may rescind coverage or deny the claim.