A fraudulent misrepresentation occurs when a life insurance applicant purposely gives the insurance company false information or purposely fails to disclose some pertinent information.
The main thing to note here is that the client had the intent to mislead the company into issuing a life insurance policy when under normal circumstances, the company might choose not to insure the applicant.
As an example, let’s say that “Michelle,” suspecting that she was terminally ill with throat cancer and wanting to provide for her family after she passes, applied for a life insurance policy with Ambiguous Life and Casualty. When asked about questions relating to health complaints she intentionally gave false answers. Ambiguous Life then issues a policy and three years later Michelle dies of throat cancer. After an investigation by the insurance company, it becomes apparent that Michelle must have been suffering from throat cancer at the time she applied for her life policy.
Ambiguous can deny the insurance claim on the basis of fraudulent misrepresentation because Michelle concealed the symptoms and her state of health from the insurer with the specific intent to induce the company to enter into a contract that it may not have entered into, at least not on the same terms, had they known all the true facts.
All said and done, of course the insurance company always has the option of ignoring the misrepresentation and leaving the policy in place or paying out the claim if they so wish, but as an applicant who wants to make certain that their loved ones receive a benefit payment for all the premiums paid, being as honest and forthright with your insurer and/or agent is always the best way to go.