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The concept of material fact is interlinked with the principles of insurance. But, what is a material fact in insurance? This article will help you understand the concept of a material fact in insurance and its importance. We will also wrap up the article by providing an example of a material fact and some relevant court judgements on suppression of material facts.
A material fact refers to an important or relevant fact that forms the basis of decision-making. In simple words, a material fact is a piece of information that can influence a decision. In the context of insurance, a material fact is any information that can influence the decision of an insurance company to issue an insurance policy.
It also works the other way around; a piece of information given by an insurance company can also be considered a material fact if it influences the purchase decision of a policyholder.
It is imperative that both parties to an insurance contract openly display material facts to each other. Doing so will improve the quality of decision making. Further, if important material facts are withheld by a party, the insurance contract can be terminated due to non-adherence to the principles of insurance.
There should be no falsification, truncation, or misrepresentation of any valuable information considered a material fact. Let us cement our understanding of the meaning and concept of a material fact with a simple and easy-to-understand example.
Mr. Jatin bought a health insurance policy, but he did not disclose to the health insurance company that he suffers from a pre-existing condition. This accounts for willfully withholding material facts from an insurance company. The above is an example of the suppression of material facts by an insurance company.
There have also been certain court judgements when it comes to the suppression of material facts. Some of the high profile ones include:
This article is written by Team InsuranceLiya.com, an independent website that writes about insurance, finance, health, and more. Our writers have a wealth of knowledge, experience, and degrees in the fields of insurance, finance, economics, and beyond.