What Is Material Facts In Insurance
Material Facts Definition And Meaning
Material fact is every circumstance or information, which would influence the judgment of a prudent insurer in assessing the risk. It can also be described as those circumstances which influence the insurer’s decision to accept or refuse the risk or which affect the fixing of the premium or the terms and conditions of the contract, must be disclosed.
A material fact is one which would have influenced the judgment of a prudent insurer in deciding whether he would accept the risk in whole or in part and, if so, at what amount of premium. The materiality of a fact depends upon the application of this test to the particular circumstances of the case as at the date that the fact should have been communicated.
Material facts may have a bearing on the physical hazard or on the moral hazard, or they may show that if a loss occurs the insurer's liability is likely to be greater than would normally be expected.
Examples Of Material facts In Insurance Context
(a) In Fire Insurance:
The construction of the building, the nature of its use i.e. whether it is of concrete or Kucha - having thatched roofing and whether it is being used for residential purposes or as a godown, whether fire fighting equipment is available or not.
(b) In Motor Insurance:
The type of vehicle, the purpose of its use, its age (Model), Cubic capacity and the fact that the driver has a consistently bad driving record.
(c) In Marine Insurance:
Type of packing, mode of carriage, name of carrier, nature of goods, the route.
(d) In Personal Accident Insurance:
Age, height, weight, occupation, previous medical history and occupation especially if it is likely to increase the chance of an accident. Proclivity of substance abuse has to be disclosed as well- eg. alcohol or drug addiction.
(e) Burglary Insurance:
Nature of stock, value of stock, type of security precautions taken.
The above are just indicatory of the type of material facts that must be disclosed. Details of previous losses is a material fact that has to be disclosed in all cases.
Material Facts Definition And Meaning
Material fact is every circumstance or information, which would influence the judgment of a prudent insurer in assessing the risk. It can also be described as those circumstances which influence the insurer’s decision to accept or refuse the risk or which affect the fixing of the premium or the terms and conditions of the contract, must be disclosed.
A material fact is one which would have influenced the judgment of a prudent insurer in deciding whether he would accept the risk in whole or in part and, if so, at what amount of premium. The materiality of a fact depends upon the application of this test to the particular circumstances of the case as at the date that the fact should have been communicated.
Material facts may have a bearing on the physical hazard or on the moral hazard, or they may show that if a loss occurs the insurer's liability is likely to be greater than would normally be expected.
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Examples Of Material facts In Insurance Context
(a) In Fire Insurance:
The construction of the building, the nature of its use i.e. whether it is of concrete or Kucha - having thatched roofing and whether it is being used for residential purposes or as a godown, whether fire fighting equipment is available or not.
(b) In Motor Insurance:
The type of vehicle, the purpose of its use, its age (Model), Cubic capacity and the fact that the driver has a consistently bad driving record.
(c) In Marine Insurance:
Type of packing, mode of carriage, name of carrier, nature of goods, the route.
(d) In Personal Accident Insurance:
Age, height, weight, occupation, previous medical history and occupation especially if it is likely to increase the chance of an accident. Proclivity of substance abuse has to be disclosed as well- eg. alcohol or drug addiction.
(e) Burglary Insurance:
Nature of stock, value of stock, type of security precautions taken.
The above are just indicatory of the type of material facts that must be disclosed. Details of previous losses is a material fact that has to be disclosed in all cases.
Insurance Law And Practice - ICSI
What Is Material Facts In Insurance
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Sunday, April 16, 2017
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