If misrepresentation is found, what is the retroactive effect on coverage?

If misrepresentation is found, what is the retroactive effect on coverage?

• A. The policy is modified but remains in force
• B. Coverage could be void from inception
• C. Premium increases but coverage remains
• D. The insurer can only deny future claims

Answer: (B)

Misrepresentation in insurance is a false or incomplete statement that is material to the risk. If the misrepresentation is material and discovered, the insurer can rescind the contract, meaning the policy is voided ab initio. In other words, coverage is treated as if it never existed, from the start date of the policy. That retroactive void is why the correct outcome is that coverage could be void from inception. This isn’t the same as merely modifying the policy, increasing premiums, or denying only future claims. Those outcomes would not fully negate the contract from the beginning, which is why they aren’t the right result in this scenario.

Misrepresentation in insurance is a false or incomplete statement that is material to the risk. If the misrepresentation is material and discovered, the insurer can rescind the contract, meaning the policy is voided ab initio. In other words, coverage is treated as if it never existed, from the start date of the policy. That retroactive void is why the correct outcome is that coverage could be void from inception.

This isn’t the same as merely modifying the policy, increasing premiums, or denying only future claims. Those outcomes would not fully negate the contract from the beginning, which is why they aren’t the right result in this scenario.