Multiple choice

The termination of an insurance contract by the insurer when material misrepresentation has occurred is known as:-

  1. Rescission

  2. Reinstatement

  3. Replacement

  4. Both (1) and (2)
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A Correct answer
Explanation

Rescission is the termination of an insurance contract by the insurer when material misrepresentation has occurred. Insurers have the right to rescind an insurance policy due to concealment, material misrepresentation, or material breach of warranty. Generally, to rescind, an insurer will send a notice to the insured and tender a check in the amount of the premium paid for the relevant policy period.

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