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

• A. The policy remains in force regardless.
• B. The insurer may void the coverage.
• C. The agent will automatically receive a commission.
• D. The client loses no rights.

Answer: (B)

A material misrepresentation is a false statement on the application that would have changed the insurer’s decision about risk. Because the insurer relied on that information to issue the policy, a material misrepresentation gives the insurer the right to void the coverage or rescind the policy, as if it never existed, and to deny a claim based on that misrepresentation. In other words, the contract isn’t automatically kept in force just because a misstatement occurred—the insurer can undo the agreement when the misrepresentation is significant enough to affect underwriting. The other options don’t fit because misrepresentation can’t guarantee the policy stays active, has nothing to do with the agent’s commission, and it does affect the insured’s rights by potentially canceling or denying coverage.