What could be a consequence of material misrepresentation?

Material misrepresentation occurs when a party, typically the insured, provides false or misleading information that affects a material fact during the underwriting process. This can relate to key elements such as the nature of the risk or the applicant's history. When such misrepresentation is identified, it undermines the trust and accuracy that is foundational to the insurance contract.

The correct consequence of material misrepresentation is that it may lead to voiding the insurance contract. This means the insurer can treat the contract as though it never existed, as the misrepresented information affects their decision to accept the risk or the terms of coverage. If an insurance company is led to believe certain facts to be true based on the applicant's statements, but those facts are later proven false, the insurer has the right to nullify the contract due to the lack of a sound basis for its issuance. This highlights the importance of honesty and transparency in insurance applications, as well as the reliance insurers place on the accuracy of the information provided.

Other options, such as adjusting premium rates, extending coverage, or offering a refund, could occur in different contexts but are not direct consequences of material misrepresentation. Adjusting the premium might happen due to changes in risk assessment but does not typically apply if misrepresentation is