California Life-Only & Accident and Health AgentAccident and Health InsuranceMedium
An applicant for a health insurance policy intentionally fails to disclose a pre-existing heart condition on their application. This act is an example of:
- AConcealment
- BAdverse Selection
- CMisrepresentation
- DWarranty Breach
Show answer & explanationAnswer & explanation
Correct answer: A. Concealment
Concealment is the intentional withholding of material information that is relevant to the insurance risk. By intentionally not disclosing a pre-existing heart condition, the applicant is concealing material information.
Why the other options are wrong
- B. Adverse selection is when those more likely to need insurance are more likely to buy it, not an act of an individual applicant.
- C. Misrepresentation is making a false statement of a material fact, whereas concealment is withholding information.
- D. A warranty is a statement guaranteed to be true; a breach of warranty would be if a guaranteed statement proved false.
Concealment in Insurance
The intentional withholding of material facts by an applicant for insurance, which, if known, would have influenced the insurer's decision to issue or rate the policy.
- Must be intentional.
- Must involve material information.
- Can lead to policy voidance.
Memory trick: Errors in applying for insurance can be hiding or stating falsely.