What are the consequences of misrepresentation during underwriting?

Misrepresentation during the underwriting process can lead to significant negative consequences for both the insurer and the insured. When insured individuals provide false, incomplete, or misleading information regarding their health status, lifestyle, or any other relevant factor, it undermines the entire risk assessment process that underwriters rely on to price the policy accurately.

The correct answer reflects that misrepresentation can result in coverage denial, denial of claims, or even the rescission of the policy altogether. If a claim is made based on information that was misrepresented, the insurer may investigate the validity of the claim. If they find discrepancies between what was reported and the truth, they may deny the claim, leading to financial consequences for the policyholder who relied on that coverage. Furthermore, insurers can rescind a policy if they determine that the misrepresentation was material—meaning it would have influenced the insurer's decision to issue the policy or set its terms, effectively voiding the contract from inception.

The other choices suggest outcomes that do not typically occur as a result of misrepresentation. For instance, enhanced benefits upon renewal or increased coverage limits would not be rewarded for misrepresentation, as these actions are based on trust and accurate information. Higher premium rates being accepted without review also contrasts the principles of underwriting