What happens if an applicant for life insurance fails to disclose a material fact?

When an applicant for life insurance fails to disclose a material fact, the outcome is that the contract becomes voidable by the insurer if it is in force for less than two years. This principle is rooted in the concept of materiality in insurance contracts, where a material fact is any information that could influence the insurer’s decision to issue a policy or determine the premium rates.

In the insurance world, if the insurer discovers that a material fact was withheld within the first two years of the policy being active, they have the right to void the contract. This is because the insurer relied on the information provided in the application to assess risk and make underwriting decisions. If a misrepresentation or omission is uncovered, particularly one that could have led the insurer to refuse coverage or adjust premium rates, it can significantly affect the integrity of the contract.

If less than two years have passed since the policy was issued, the insurer retains the right to take action based on the incomplete information. However, generally after this period—known as the contestability period—the contract becomes more secure, and the insurer may find it much more challenging to void the contract based on non-disclosure.

Thus, the ability of the insurer to void the contract shortly after its inception if a material fact is