Under what condition can an insurance policy be cancelled?

The ability for an insurance policy to be canceled due to misrepresentation in the application is grounded in the principle of utmost good faith, or "uberrima fides," which requires the policyholder to provide truthful and complete information when applying for coverage. If the insurer discovers that the applicant misrepresented their information – whether intentionally or due to negligence – it has the right to cancel the policy. This is particularly important because accurate information is critical for the insurer to assess risk and price the policy appropriately. Misrepresentation can undermine this process, leading to cancellations to protect the insurer from risks that were not adequately disclosed at the outset.

In contrast, while a policyholder can indeed request a cancellation, this scenario doesn’t always guarantee that the insurer will respond favorably. The cancellation process is subject to terms defined in the policy. Furthermore, the other options regarding claim limits and filing too many claims pertain more to potential adjustments in policy status or conversions rather than outright cancellation due to dishonest information at the application stage.