Which action by the insured could lead to cancellation?

• A. Misrepresentation by the insured can lead to cancellation of the policy
• B. Misrepresentation by the insurer increases coverage
• C. Misrepresentation has no effect on policy
• D. Misrepresentation only affects premium

Answer: (A)

Misrepresentation by the insured is a breach of the truthful disclosure that underpins an insurance contract. When the insured provides false information about a risk factor and that information is material to the insurer’s decision to issue or price the policy, the contract can be canceled or rescinded. The insurer relies on accurate facts to assess risk; if those facts are false, the insurer may void coverage, especially if the misrepresentation is deliberate or affects the underwriting decision. That’s why the action by the insured—giving false, material details—is the one that could lead to cancellation. The idea that misrepresentation by the insurer or that misrepresentation has no effect or only affects premium doesn’t fit how contract guarantees and underwriter risk are structured.