What is a common consequence of failing to disclose relevant information when purchasing insurance?

Failing to disclose relevant information when purchasing insurance can lead to claim denial or policy cancellation because insurance contracts are based on the principle of utmost good faith (uberrima fides). This principle requires both the insurer and the insured to act honestly and disclose all material facts. If the insured omits or misrepresents relevant information, the insurer may view this as a violation of trust and may deny claims or cancel the policy altogether.

For example, if an individual fails to disclose a pre-existing medical condition when applying for health insurance, the insurer may refuse to pay for treatments related to that condition or may cancel the policy altogether once they discover the omission. This consequence emphasizes the importance of complete transparency during the application process.

In contrast, other options do not adequately reflect the most immediate and common ramifications of failing to disclose relevant information in an insurance context. Increased premiums might occur due to various reasons, but it isn’t a direct consequence of non-disclosure. Automatic renewal of the policy typically is not affected by the disclosure status. Breach of contract could be a consideration, but it is more specific to issues related to not fulfilling the contractual terms, rather than the disclosure of information.