After issuing of policy, can the insurer cancel the policy and also forfeit the premium paid, if they find any incorrect statement in the proposal form?
Under such circumstances, the insurers have the option to cease all benefits under the policy
After issuing of policy, can the insurer cancel the policy and also forfeit the premium paid, if they find any incorrect statement in the proposal form?
Ramesh Kini, Mangalore
It is true that if an insurer finds out that the insured had made any untrue or incorrect statement or did not disclose any material information in the proposal form or the personal statement, policy contract becomes null and void at the option of the insurers. Under such circumstances, the insurers have the option to cease all benefits under the policy and also premiums paid under the policy can be forfeited. However, to protect the policyholder’s and claimant’s interest, Section 45 of the Insurance Act, 1938 provides that the insurers cannot exercise this option two years after the commencement of the policy unless the incorrect statement is in respect of a material fact and was deliberately made with an intent to defraud.