Life & Health Insurance Exam (National Portion)General InsuranceMedium
A life insurance applicant intentionally withholds information about a serious pre-existing medical condition on their application. This act could be considered a violation of which principle of insurance?
- AUtmost Good Faith
- BWarranties
- CAdhesion
- DAleatory
Show answer & explanationAnswer & explanation
Correct answer: A. Utmost Good Faith
Utmost Good Faith requires both the insurer and the insured to deal honestly and openly with each other. Intentionally withholding material information is a breach of this principle.
Why the other options are wrong
- B. Warranties are statements guaranteed to be true, but the act itself of withholding information violates the broader principle of good faith.
- C. Adhesion describes contracts where one party dictates terms, not about honesty.
- D. Aleatory refers to contracts where values exchanged are unequal and contingent on an uncertain event.
Utmost Good Faith
A legal principle implying that all parties to an insurance contract are expected to act with honesty and not to mislead or withhold critical information from each other.
- Requires honesty from both insured and insurer.
- Full disclosure of material facts.
- Breach can lead to contract voidance.
Memory trick: P.A.U.C.A. - Personal, Adhesion, Unilateral, Conditional, Aleatory