Georgia Adjuster Practice Test

If an insured intentionally conceals a material fact on an application for insurance, what may happen to the coverage?

1. Extended

2. Voided

3. Limited

4. Reinstated

The correct answer is: Voided

When an insured intentionally conceals a material fact on their insurance application, the coverage may be voided. This principle is grounded in the fundamental concept of utmost good faith in insurance contracts, also known as "uberrima fides." Intentionally concealing a material fact means that the insured has provided false information or has omitted critical details that would affect the insurer's decision to provide coverage or the terms of that coverage. Materiality refers to information that could influence the insurer's risk assessment. For instance, failing to disclose prior claims, significant health issues, or criminal records could alter the insurer’s willingness to issue a policy or could lead to different premium rates. If the insurer discovers this intentional concealment, they have the right to void the policy. This means the insurance contract is treated as if it never existed, which eliminates any coverage for claims that might arise while the policy was in effect. The principle serves as a deterrent against dishonesty in the insurance application process, ensuring that both parties can rely on the truthfulness of the information provided. In this scenario, other options such as limited coverage or reinstatement do not directly address the consequences of intentional concealment. Extended coverage would imply an expansion of terms, which contradicts the reasoning to