NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance
Mr. Sameer, aged 35, buys a life insurance policy but conceals that he has been treated for a heart condition. He dies in the second year, and the insurer finds the non-disclosure. Which principle has the insured primarily breached?
He has breached the principle of utmost good faith. Insurance contracts require the proposer to disclose all material facts, and a known heart condition is material to the insurer's risk assessment. Concealing it can entitle the insurer to repudiate the claim.
- APrinciple of indemnity
- BPrinciple of utmost good faithCorrect
- CPrinciple of subrogation
- DPrinciple of contribution
Explanation
Utmost good faith (uberrimae fidei) requires the proposer to disclose all material facts. A heart condition is material to underwriting, so concealment can allow the insurer to repudiate. Indemnity, subrogation and contribution concern loss compensation and recovery, not disclosure.
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