What is a potential consequence of misrepresentation on an insurance application?

What is a potential consequence of misrepresentation on an insurance application?

• A. Increased premiums
• B. Denial of claims
• C. Enhanced benefits
• D. Automatic renewal of coverage

Answer: (B)

Misrepresentation on an insurance application can lead to the denial of claims because insurers rely on the accuracy of the information provided by applicants to assess risk and determine coverage. If an applicant provides false or misleading information, it undermines the insurer's ability to accurately price the policy or evaluate the insurability of the applicant. Should a claim arise that is connected to the misrepresented information, the insurer may deny the claim altogether, asserting that the misrepresentation contributed to their decision to issue the policy or the terms of coverage. In contrast, the options related to increased premiums, enhanced benefits, and automatic renewal do not typically stem from misrepresentation. Rather, these are outcomes that might occur due to accurate and truthful information provided on an application or as part of a renewal process. Misrepresentation generally leads to negative consequences for the policyholder, primarily affecting claim outcomes.

Misrepresentation on an insurance application can lead to the denial of claims because insurers rely on the accuracy of the information provided by applicants to assess risk and determine coverage. If an applicant provides false or misleading information, it undermines the insurer's ability to accurately price the policy or evaluate the insurability of the applicant. Should a claim arise that is connected to the misrepresented information, the insurer may deny the claim altogether, asserting that the misrepresentation contributed to their decision to issue the policy or the terms of coverage.

In contrast, the options related to increased premiums, enhanced benefits, and automatic renewal do not typically stem from misrepresentation. Rather, these are outcomes that might occur due to accurate and truthful information provided on an application or as part of a renewal process. Misrepresentation generally leads to negative consequences for the policyholder, primarily affecting claim outcomes.