Material Misrepresentation

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MATERIAL MISREPRESENTATION Material misrepresentation in insurance occurs when an insured person makes a false or misleading statement about a significant fact on their insurance application or during the claims process. This can lead to the insurer denying coverage or cancelling the policy. For instance, the policyholder provides false information regarding the location of the insured property. Material misrepresentation may be: A) Intentional misrepresentation: This occurs when the insured person deliberately makes a false or misleading statement. For example, someone might intentionally lie about their driving history on an auto insurance application in order to get a lower rate. B) Unintentional misrepresentation: This occurs when the insured person makes a mistake or forgets to disclose something important. For example, someone might forget to mention a previous health condition on a life insurance application. For a misrepresentation to be considered material, it must meet two criteria: 1- It must be significant: The misrepresentation must be about something that is important to the insurer's decision to issue the policy or the amount of premium charged. For example, failing to disclose a pre-existing medical condition on a life insurance application would likely be considered material. 2- It must have influenced the insurer: The misrepresentation must have actually had an impact on the insurer's decision. For example, if an applicant for auto insurance fails to disclose a speeding ticket, but the insurer would have issued the policy at the same rate even if they had known about the ticket, then the misrepresentation would not be considered material. If an insurer discovers that a material misrepresentation has been made, they can take a number of steps, as a consequences of misrepresentation which may include: Denying coverage: The insurer can refuse to provide coverage under the policy. -Cancelling the policy: The insurer can cancel the policy, even if the -misrepresentation was made at the time of application. -Rescinding the policy: The insurer can cancel the policy and seek to recover any claims that have been paid out. -Charging a higher premium: The insurer may charge a higher premium to reflect the increased risk. The best way to avoid misrepresentation is to be honest (utmost Good Faith) and accurate when answering questions on your insurance application and during the claims process. #benewinsurance #insurtech #inclusiveinsurance #insurance #reinsurance #takaful

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