What action may an insurance company take when misrepresentation is discovered on a policy application?

When an insurance company discovers misrepresentation on a policy application, it typically has the authority to void the policy during the contestable period. The contestable period usually lasts for the first two years after the policy is issued. If the insurer finds that the insured provided false or misleading information while applying for coverage, it can rescind the policy and deny any claims based on that misrepresented information. This action is grounded in the principle of utmost good faith, which requires both parties to the insurance contract to provide truthful information.

It's important to note that if the misrepresentation is discovered after the contestable period, the insurer generally cannot void the policy based on misrepresentation alone. The insurer's ability to act on misrepresentation hinges significantly on the timing within the life of the policy and the nature of the misrepresentation.