Overview: Insurance contracts are built on the doctrine of utmost good faith — both parties must deal honestly. These three legal concepts define what honesty requires, where it can be imperfect, and what the consequences of dishonesty are.

These three doctrines differ in where they live (inside the contract or outside it), the standard of truth they demand, and what the insurer must prove to void the policy.

Representations

A representation is a statement made by the applicant before the contract is formed, to induce the insurer to accept the risk. Representations are not part of the policy itself — they are pre-contractual statements. The standard for representations is substantial truth: the statement must be substantially true to the best of the applicant's knowledge. A small, honest approximation error — estimating a fence at 50 feet when it is 52 feet — is not a problem.

Most statements on an insurance application are representations. The questions about your health history, driving record, and property characteristics are seeking representations from the applicant.

Warranties

A warranty is a statement or promise that is actually incorporated into the insurance contract as a term of the agreement. The historical common-law standard for warranties was strict: warranties had to be literally true, and any breach — even innocent and unrelated to the loss — could void the policy. A property owner who warranted that a sprinkler system was operational could see the entire policy voided if the system was briefly offline for maintenance when a fire started.

Because this strict rule was seen as harsh and unjust, most modern state statutes have softened it. Many jurisdictions now treat what are technically warranties as representations, requiring the breach to be material before the insurer can void coverage. As an exam candidate, know the traditional distinction (warranties are strictly enforced; representations require materiality) but understand that modern law has moved warranties closer to the representation standard in most states.

Concealment

Concealment is lying by silence — the intentional failure to disclose a material fact that the insurer would need to know to evaluate the risk, even if the insurer did not ask a specific question about it. An applicant seeking property insurance who "forgets" to mention that the neighboring property manufactures fireworks has committed concealment. The obligation to volunteer material information flows from the utmost good faith standard that underlies all insurance contracts.

Consequences of Misrepresentation

The central legal test for any misrepresentation is materiality. A misrepresentation is material if, had the insurer known the truth, it would have: (1) rejected the application entirely, (2) charged a higher premium, or (3) attached different terms or exclusions. An insurer cannot void a policy over an immaterial error.

If a material misrepresentation is found, the insurer's primary remedy is rescission: the policy is declared void ab initio, treated as if it never existed. The insurer typically refunds premiums, and any unpaid claims are denied. Critically, the misrepresentation does not need to have caused the loss — a misrepresentation on a life insurance application can void the policy even if the insured dies in an unrelated accident, because the policy itself was obtained through false pretenses.

The incontestability clause limits the insurer's ability to rescind a life insurance policy after it has been in force for two years during the insured's lifetime. After that two-year window, the insurer generally cannot void the policy based on misrepresentations, with narrow exceptions for outright fraud. Misstatement of age, however, is a permanent exception: a life insurer can always adjust the death benefit to reflect the amount the paid premiums would have purchased at the correct age — this is not a voiding of the policy but an adjustment of its terms, and it can be done at any time, even decades later.

FAQ

Can an insurer deny a claim because an applicant lied about something unrelated to the loss?
Yes, in most cases. If a misrepresentation is material — meaning it would have affected the insurer's decision to issue the policy or the terms it offered — the insurer can void the contract even if the misrepresentation had nothing to do with the specific loss. The reason is that the policy itself was fraudulently obtained.

What is the practical difference between a representation and a warranty today?
In practice, for exam purposes, remember that representations require substantial truth and materiality to void the policy, while warranties historically required literal truth and any breach could void coverage. Modern law has softened warranties toward the representation standard in most states, but the traditional distinction still appears on exams.