The risks of invalidating a life insurance policy

Discover the various cases that may invalidate your life insurance policy

An insurance contract can be considered as never having existed. If this be the case, the insured cannot then make a claim to compensation, due to the lack of adherence to a condition of substantive or procedural requirements necessary to maintain its validity. The risks of nullifying a life insurance contract, are mostly, caused by misrepresentations, omissions and intentional lack of consent on the behalf of the policyholder.

An omission or a deliberate misrepresentation on the part of the insured to the extent where this comportment causes a change to the object of the covered risk, or diminishes the view for the insurer, constitutes a risk in invalidating the life insurance contract. Even if the omitted or falsified risk has no impact on the loss, this is means for invalidating the contract. In this case, the payments remain vested in the insurance company, which also retains full right to all outstanding contributions due by way of damages.

An oversight or an inconsistent statement by the policyholder, whose bad faith is not proven, does not constitute a risk of invalidating the insurance. If bad faith is found before the advent of a loss, the insurer has two options. The first is that the insurer may decide to maintain the contract, by posing as a condition, an increase of the premium that the insured must accept. The second is that the insurer may also cancel the contract within ten days after notification by registered mail. In this case, the insurer must reimburse a certain portion of the premium that was already disbursed proportional to the duration in which the insurance has stopped running.

If this finding of bad faith on the behalf of the policyholder is found only after a disaster, it is unlikely that the life insurance policy would be voided. The compensation would be, however diminished which is calculated based on rates of premiums compared to the percentage of contributions that should be due if any shortcomings were completely and accurately reported during the course of the purchase.

It follows, that it is always best to refrain from any omission or false statement upon accession to a life insurance policy to avoid exposure to the risks of nullification.