Definition
Material Fact
A material fact is any information that would influence an insurer's decision to accept a risk or the terms and premium it sets.
Examples include existing illnesses, family medical history, dangerous hobbies, occupation, prior insurance refusals and previous claims. Under the duty of utmost good faith, the proposer must disclose all such facts truthfully in the proposal form, the basis of the contract.
Failing to disclose a material fact, or misstating one, can lead to claim repudiation or policy cancellation. What counts as material is judged from the prudent insurer's perspective. Accurate disclosure protects the policyholder, since concealment is the most common reason claims are rejected in India.
Related terms
- Utmost Good FaithUtmost good faith (uberrimae fidei) is the duty of both parties to an insurance contract to fully and honestly disclose all material facts.
- Non-DisclosureNon-disclosure is the failure to reveal a material fact to the insurer, which can render a policy voidable or lead to claim rejection.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.