Life & Health Insurance Practice Exam 2026 - Free Practice Questions and Study Guide

A material misrepresentation in an insurance application primarily affects the insurer's underwriting decision. Underwriting is the process through which an insurance company evaluates the risk of insuring a person or property and determines the terms and pricing of the insurance policy.

When an applicant provides information that is false or misleading and that information is deemed material—meaning it could influence the insurer’s decision to provide coverage or the terms under which coverage is provided—it can lead the insurer to assess the risk inaccurately. This may result in the insurer charging higher premiums, denying coverage, or even voiding the policy if the misrepresentation is discovered after the policy has been issued. Essentially, insurers rely on the accuracy and completeness of the information provided to make informed and fair underwriting decisions.

Other options, while they may relate to outcomes influenced by underwriting, do not specifically capture the direct impact of material misrepresentation. For example, the adequacy of coverage provided would be more dependent on the policy terms and limits rather than a misrepresentation itself. The speed of claims processing is more contingent on the claims handling procedures rather than the underwriting at the application stage. Additionally, the renewal of a policy might be influenced by prior claims experiences or changes in the risk profile, but again, the initial misrepresentation