{2:20 minutes to read} Incorrect or false information on an insurance application could have major ramifications.
Whether the insured is a business or an individual, applying for insurance means entering into a contract. The information provided on the application is considered a legal representation of facts, and the insurance company may rely upon this information to determine:
- whether to issue a policy;
- the cost of premiums; and
- specific policy terms, exclusions, conditions or riders.
If the applicant provides incorrect information or false representations when filling out the application, there could be significant consequences for the policy and any potential claims.
For example, a business purchases a “liability” or “property casualty” policy to protect liability for customers’ damaged property and potential lawsuits. Under most states’ law, if the policyholder made a material or false representation on its application, the entire policy and resulting claim will be voided.
What is a material misrepresentation?
A material misrepresentation means that the insurance company either would not have issued the policy, or they would have issued a different kind of policy if the facts had been presented accurately. A material misrepresentation may occur when an application contains false information, or it may include the withholding of information.
With a liability or property and casualty policy, intent to deceive is not always necessary to void a claim. The insurance company does not have to prove that the policyholder intended to deceive it or obtain a policy by fraudulent means. In most states, including New York, any material misrepresentation gives the insurance company a legal basis to deny the claim and rescind the policy.
Don’t short change the application process:
- Read the questions carefully.
- Consider each answer carefully.
- Be diligent about answering any follow-up questions.
The information that you are providing needs to be comprehensive and correct — this is the only way to ensure that the insurance policy you’re purchasing will take care of you or your business, should a claim arise.
How can you be certain the information provided on your insurance application is accurate and complete?
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack
833-824-5350
[email protected]
