What Is Misrepresentation? Definition

Why it matters

If an applicant gives wrong health answers, the insurer may deny a claim or cancel the policy, often within the contestability period. If an agent misstates benefits, costs, or terms, the state may fine the agent or revoke the license. Misrepresentation is a listed unfair trade practice in state law. Applicants should answer questions fully and review the application before signing. Families should keep copies of what they were told in writing.

Source: naic.org

Where we use this term

Related terms

Insurance Fraud: Insurance fraud is a deliberate lie or omission meant to gain an unfair benefit from insurance. It can be committed by applicants, policyholders, agents, or others.
Contestability Period: The contestability period is the first two years after a policy starts, during which the carrier can review the application and deny a claim for a material misstatement. Many states set this limit.
Unfair Trade Practices: Unfair trade practices are insurance sales and claims actions that state law bans, such as misrepresenting policy terms, false advertising, and unfair discrimination. Most states base their laws on an NAIC model act.
E-Application (e-app): An e-application is a life insurance application completed and submitted electronically instead of on paper. Many carriers offer e-apps with built-in questions, checks, and electronic signatures.
Objection Handling: Objection handling is the skill of listening to a prospect's concerns, such as price or timing, and answering them honestly. A good response solves the real concern and never misleads.

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