Colorado Life Producer License Practice Test

What is an example of material misrepresentation?

1. Forgetting to mention a minor health issue

2. Not reporting a past surgery for a chronic condition

3. Failing to provide a work history

4. Listing a higher income than actual

The correct answer is: Not reporting a past surgery for a chronic condition

Material misrepresentation occurs when a person provides false or misleading information that influences an insurer's decision regarding the underwriting process or the premium charged. In this context, not reporting a past surgery for a chronic condition is a clear example of material misrepresentation because such information is critical for an insurer to assess the risk associated with providing coverage. Underwriters rely on accurate information about a person's medical history to determine policy eligibility and pricing. Not reporting a past surgery related to a chronic condition can significantly impact an insurance company’s decision-making, as it may indicate a higher level of risk than what was disclosed. If an insurer is unaware of such a condition, they may issue a policy under false pretenses, potentially leading to future claims being denied or policy cancellation. Therefore, this form of non-disclosure is deemed material because it directly pertains to the risk assessment that insurers undertake when issuing policies. The other scenarios, while possibly important to an application, may not substantially affect the overall risk profile to the same extent as omitting a significant medical procedure. Minor health issues and work history typically do not shift underwriting decisions dramatically compared to critical medical histories that involve surgeries or chronic conditions. The overstatement of income might be misleading but ordinarily does not have the same immediate impact on underwriting health