Implications of concealment, non disclosure or misrepresentation by the insured :

It may turn out from the representations furnished by the customer that the details are incomplete or any important information is concealed or is misleading. In such circumstances it is the choice of the insurer whether to:

1. Incorporate the required changes in the contract and charge a different premium.

2. Accept the policy and pay compensation especially if the facts have negligible importance.

3. Avoid any obligation on its part as per the policy.

It has to be proved by the insurer that the non-disclosure or misrepresentation was intentional on the part of the insured to commit fraud and deceive the insurer before it can stop payment of compensation. As per section 45 of the Insurance Act the insurance company can resort to this stance before the passage of two years after which it cannot take such recourse. Non-disclosure may be unintentional on the part of the insured. Even so such a contract is rendered voidable at the insurers option and it can refuse any compensation. Any concealment of material facts is considered intentional. In this case also the policy is considered void. Suppose a person discovers that he has cancer, which is in its last stages and is hopeless to go for medical treatment. Immediately he buys a life insurance policy where he conceals this fact from the insurers. He dies four months after buying the policy. The insurance company can contest the claim for payment of policy proceeds to his beneficiary on the ground that a vital fact material to the contract was concealed.