What may an insurance company do when a misrepresentation on a life insurance application is discovered?

When a misrepresentation on a life insurance application is discovered, the insurance company may void the policy if the misrepresentation is found to be material and is uncovered during the contestable period, which is typically the first two years after the policy is issued. A material misrepresentation is one that, had the true facts been known, would have affected the insurance company’s decision to issue the policy or the terms under which it was issued.

During this contestable period, the insurer has the right to investigate and assess the validity of the information provided in the application. If they find that the applicant intentionally provided false information or omitted significant details that could impact their underwriting decision, they may choose to void the policy altogether, meaning that it is as if the policy never existed and no claims will be paid based on that policy.

This action is a protective measure for insurance companies, ensuring that they are not deceived into underwriting a policy that they would have otherwise declined or rated differently, thus safeguarding against fraudulent practices.