In disability policy terms, which action best describes the effect of misrepresentation or false statements?

• A. Cancel policy
• B. Reinstate coverage
• C. Rescind coverage
• D. Reduce benefits

Answer: (C)

When misrepresentation or false statements are made on a disability policy, the insurer can rescind coverage. Rescind means treating the contract as void from the start, as if it never existed, so no benefits would be payable for any period affected by the misrepresentation. This remedy directly addresses the risk created by false information by nullifying the agreement at inception.

Cancellation is a broader term that ends a policy for various reasons and isn’t specifically tied to misrepresentation. Reinstatement applies to policies that have lapsed and seeks to bring them back under new terms; it isn’t the response to misrepresentation. Reducing benefits adjusts the amount paid based on accurate information, but it doesn’t void the contract itself.