Rescission

Rescission In insurance, rescission is the cancellation of an insurance policy by the insurer, retroactively making the policy as if it never existed. This can happen if the insurer discovers that the policyholder made material misrepresentations or omissions on the insurance application. A material misrepresentation is a false statement that is important to the insurer's decision to issue the policy. An omission is the failure to disclose a material fact. The right to rescind an insurance policy is based on the principle of uberrimae fides, which Latin for "utmost good faith." This means that both the insurer and the policyholder have a duty to be honest with each other during the insurance application process. If the policyholder makes a material misrepresentation or omission, the insurer can rescind the policy to avoid being placed at an unfair disadvantage. There are two reasons why an insurance policy may be rescinded: -First, the policy may be rescinded when the omission, concealment, or incorrect statement is fraudulent. -Second, the policy may be rescinded if the omission, concealment or incorrect statement was material either to the acceptance of the risk or to the hazard assumed by the insurer. The advantage of this principle to that client is that, when an insurance company rescinds a policy, they must inform the policyholder via a rescission notice, in which they must return or offer to return the policy premiums paid. The right to rescind an insurance policy is not unlimited. In most cases, the insurer must notify the policyholder of its intent to rescind the policy within a certain period of time, typically 30 days. The insurer must also provide the policyholder with a reason for the rescission. If an insurer rescinds your insurance policy, you will be responsible for paying any premiums that you have already paid. You will also be responsible for any claims that are made against the policy while it was in effect. It should be noted that rescission is different from cancelation: While Rescission coverage as of the policy start date, erasing the contract as if it never existed and all premiums is returned. Cancellation ends coverage after a certain date (when you stopped paying monthly premiums, for example), premiums is returned only if paid to cover months after cancellation. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful