If a policyholder conceals information during the application process and dies after the policy has been in effect for five years, what can the insurance company do?

When a policyholder conceals information during the application process, it can be considered a form of misrepresentation or fraud. Insurance contracts are based on the principle of utmost good faith, meaning both parties must provide honest and full disclosures of pertinent information. If an insurance company discovers that a policyholder provided false information or concealed relevant facts, it has the right to challenge the validity of the policy.

If the concealment is discovered after the policy has been in effect for five years, the insurance company typically may refuse to pay the death benefit under the fraud provision if the concealed information is material to the risk being underwritten. Material information is anything that would affect the insurer’s decision to provide coverage or set the premium.

Thus, the insurance company can deny the claim because the act of concealment has compromised the integrity of the insurance contract, allowing them to invoke the fraud clause and refuse payment. This principle is a key aspect of insurance law, protecting insurers from fraudulent activities while ensuring that policyholders provide truthful and complete information when purchasing coverage.