Published on

What Is Misrepresentation in Insurance?

The insurance industry has continued to experience consistent growth worldwide in recent years. More people understand the need to protect themselves and their families from unexpected events and losses, which has caused a rise in insurance-related activities, including the creation and extension of insurance contracts, the establishment of more insurance companies, and the employment of more insurance personnel. In practically every aspect of the industry, there is a clear boom. 

But unfortunately, with this industry growth comes to a few downsides, most notably fraudulent and deceitful activities, which our discussion here will be based on. Specifically, we will be discussing misrepresentation in insurance and a few issues surrounding this concept. Let’s begin with the misrepresentation definition. What does it truly mean?

Definition of Misrepresentation in Insurance 

The word misrepresentation simply refers to giving false statements and untrue accounts or claims. Therefore, to define misrepresentation in insurance, one simply has to relate misrepresentation to aspects of insurance where it can be perpetrated. In light of this, here is a concise misrepresentation insurance definition: 

Misrepresentation is the act of entering into a contract with a company or organization on a false basis by making statements that are not true. Misrepresentation on the part of the insured in an insurance policy grants the insurance company the right to cancel the policy. Insurance and other companies can commit fraud, also. 

Also read:How Long Does an Insurance Claim Take?

If you’re filing an insurance claim to cover the costs of a car accident, damage to your property, or a personal injury, then you are...

What Is Misrepresentation in Insurance Law

Generally speaking, under the law, misrepresentation is one of the elements of fraud and other fraud-based legal actions. The law dictates that all contracts, including insurance contracts, are subject to good faith. As a result, both the insurer and the prospective insured must act in good faith throughout the contract’s duration. Giving false statements during this process to the other party constitutes the element of representation, which, by implication, becomes illegal. Therefore, both the misrepresentation insurance definition and the misrepresentation meaning in law are practically the same. However, what the law does is give room for legal actions and implications. 

Types of Misrepresentation in Insurance

Misrepresentations about insurance can be either positive or negative. A positive misrepresentation happens when the (potential) insured says something not true about a fact that is vital to the insurer (a material fact). 

One example would be giving a wrong answer on purpose to a question during the underwriting process. On the other hand, a negative misrepresentation happens when the (potential) insured doesn’t tell the insurer about a fact that is important. This could happen, for example, if the (potential) insured did not tell the insurance company about a medical condition they knew about when they filled out the life insurance proposal form.

The insurance company can misrepresent all factors necessary for a payout.

In positive or negative misrepresentation, the underlying element is the presence (or absence) of material facts. Therefore, for better clarification, let’s briefly address the question, what is material representation in insurance? 

A material misrepresentation insurance contract happens when a party makes a false statement that is: 

  1. Vital to the acceptance or approval of the risk; or
  2. If the statement could change the percentage the insurance would give or the insurer’s decision to give the contract at all.

What Is an Example of Misrepresentation in Insurance

Misrepresenting something is often telling a lie (commission) or not revealing vital information (omission). A lie of omission would be, for example, not telling the insurance company that you put in a swimming pool when you did. Also, saying that a sober passenger was driving when a drunk person (who is the insured) was actually behind the wheel is an example of a lie of commission.

When Can a Misrepresentation Void a Policy

Generally, insurance policies are void for misrepresentation if the aggrieved party can prove three things:

  1. The claim made was false;
  2. The party knew it was false or made it in bad faith; and
  3. The claim was made under pretenses.

How to Protect Yourself From the Misrepresentation of Information from the Insurer

People often buy the insurance and then put it away until a loss happens, and a claim is made. Some people then find out their policies don’t cover everything their agents said they would or even have no coverage. Many innocent individuals have different stories of how the agent falsely presented certain terms, leading them to pay significant amounts of money, ultimately leading to nothing. 

To protect yourself from such unexpected mishaps, here are a few tips: 

  1. Choose an insurance plan you can afford;
  2. Conduct your research to see how stable the company is;
  3. Do not purchase a plan you don’t need;
  4. Be sure to get a second opinion;
  5. Thoroughly go through your policy;
  6. Know the punishments and penalties for making withdrawals from your policy or plan; and
  7. Finally, keep track of your investments and stay informed.


Insurance’s ultimate goal should be to protect your interests in case of unforeseen circumstances, and the existence of misrepresentation (by either party) defeats that purpose. Thankfully, the law provides for seeking remedies and compensations in case of such acts. Be sure to speak to your attorney to seek further advice if you find yourself in such situations. Provide them with all the necessary information and documents to prepare for any obstacles that may come up, such as an outright denial by the alleged party. Do not feel anxious and leave any facts out because the attorney-client relationship between you automatically protects your information.

Article by Yevheniia Savchenko

Yevheniia Savchenko is a Product Content Manager at Lawrina. Yevheniia creates user interface copies for Lawrina products, writes release notes, and helps customers get the best user experience from all Lawrina products. Also, Yevheniia is in charge of creating helpful content on legal template pages (Lawrina Templates) and up-to-date information on US law (Lawrina Guides). In her spare time, Yevheniia takes up swimming, travels, and goes for a walk in her home city.

Thank You! Welcome on board
We use cookies to improve our website's work and deliver better services.
Our use of cookies
Upgrade the manual re-reading of agreements with Loio's AI-driven Highlights. Be in full control over every editing decision, but have the power of machine learning analysis by your hand. Turn on the Highlights tool whenever you need an extra check of your document's most essential details.
These cookies collect information that is used to help Us understand how Our Site are being used or how effective Our marketing campaigns are, or to help Us customize Our Site for You. We use Google Analytics to recognize You and link the devices You use when You visit Our Site or Service on Your browser or mobile device, login to Your User Account on Our Site, or otherwise engage with Us.
Communication services
These cookies collect information that is used to help Us to facilitate the interaction with You on Our Site. We also use those cookies to improve customer service by maintaining contact with visitors of Our Site through Intercom chat.
Ad Services
We and Our third-party partners may also use cookies and tracking technologies for advertising purposes. These third-party services collect information about Your use of Our Site over time so that they may play or display ads on devices You may use, and on other websites, apps, or services.