Which term is a false statement or lie that can render the contract void, if material to acceptance of the risk?

Which term is a false statement or lie that can render the contract void, if material to acceptance of the risk?

• A. Dividend Paid-Up Additions
• B. Medical Information Bureau (MIB)
• C. Misrepresentation
• D. Adjustable Face Amount

Answer: (C)

Misrepresentation is a false statement of a material fact that the insurer relies on when deciding to issue the policy or set its terms. If the misstatement is material to acceptance of the risk, the insurer can void or rescind the contract because the underwriting decisions would have changed with the true information. The important idea is that the statement must concern something that would affect the insurer’s risk assessment; even if not intentional, a material misstatement can invalidate the contract. The other options describe policy features or underwriting tools, not false statements that affect risk acceptance, so they don’t fit as the concept tested here.

Misrepresentation is a false statement of a material fact that the insurer relies on when deciding to issue the policy or set its terms. If the misstatement is material to acceptance of the risk, the insurer can void or rescind the contract because the underwriting decisions would have changed with the true information. The important idea is that the statement must concern something that would affect the insurer’s risk assessment; even if not intentional, a material misstatement can invalidate the contract. The other options describe policy features or underwriting tools, not false statements that affect risk acceptance, so they don’t fit as the concept tested here.