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NISM Certifications · NISM-Series-X-B: Investment Adviser (Level 2) · Basics of Insurance

Under the principle of utmost good faith (uberrimae fidei), which statement is correct for a life insurance proposal?

The proposer must disclose all material facts accurately, such as existing illnesses, when applying. Utmost good faith requires full and honest disclosure at the proposal stage, and concealment or misstatement of material facts can allow the insurer to repudiate the claim.

  1. AOnly the insurer must disclose material facts
  2. BOnly facts the proposer considers relevant need be disclosed
  3. CThe proposer must disclose all material facts, such as existing illnesses, accuratelyCorrect
  4. DDisclosure is needed only at the time of claim

Explanation

Both parties must act honestly, but the proposer holds information about health and habits, so must disclose all material facts at the proposal stage. Non-disclosure can lead to repudiation. Disclosure at claim time is too late, and relevance is judged by materiality, not by the proposer's view.

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