Greg applies for insurance and makes a false statement on the application that will influence whether or not the insurer will accept the risk. Greg's false statement is called a(n)

• A. Fraud
• B. Material misrepresentation
• C. Concealment
• D. Non-disclosure

Answer: (B)

On an insurance application, a false statement that would influence the insurer’s decision to accept the risk is called a material misrepresentation. The crucial point is that the statement is both false and material to the underwriting decision—the kind of fact the insurer would consider when deciding whether to issue the policy and at what terms. Because it concerns a truthful, significant fact about the risk, the insurer can deny, cancel, or rescind coverage if it’s discovered. Concealment and non-disclosure involve withholding information or failing to reveal it, not giving a false statement. Fraud is a broader term for deception, but the precise insurance term for a false statement that affects acceptance is material misrepresentation.