Massachusetts State Life Insurance Practice Exam

Under what condition can an insurer void a policy?

1. If the insured fails to pay premiums

2. If there is a minor misrepresentation on the application

3. If a material misrepresentation is proven

4. If the insured changes their address

The correct answer is: If a material misrepresentation is proven

An insurer can void a policy when a material misrepresentation is proven because material misrepresentations are those false statements that could influence the insurer's decision to issue the policy or adjust the terms of coverage. If the insurer can demonstrate that the misrepresentation was significant enough to impact their underwriting process, they have the right to void the policy. This is based on the principle that insurance contracts are based on the trust that both parties provide accurate and complete information. In contrast, failing to pay premiums is a breach of contract that generally leads to policy lapse rather than voiding. Minor misrepresentations may not be deemed significant enough to invalidate the policy and typically do not lead to a voided contract unless they are proven to be material. Changing an address is often a routine update and does not usually constitute grounds for voiding an insurance policy unless it significantly affects risk and the insurer was not informed. Hence, the emphasis on the materiality of misrepresentations is critical in the context of insurance underwriting and contract enforcement.