In insurance terms, what is a 'material fact'?

A 'material fact' in insurance refers to significant information that could influence an insurer's decision regarding underwriting a policy. This includes details about the risk being insured, such as the applicant's health history, lifestyle, or prior claims. When an applicant provides truthful information about these material facts, it enables the insurer to assess the risk accurately and set appropriate premiums or coverage conditions.

If a material fact is withheld or misrepresented, it could lead to severe consequences, such as the denial of a claim or the cancellation of the policy. Understanding what constitutes a material fact is crucial for both insurers and policyholders, as it underpins the duty of disclosure in insurance contracts. This obligation ensures that all relevant information is considered in the risk assessment process, allowing for fair underwriting practices.