What constitutes a misrepresentation in insurance?

A misrepresentation in insurance occurs when false information is provided regarding a policy, which could significantly impact the decision-making process of either the insurer or the insured. Lying about how a policy works fits this definition precisely, as it introduces an incorrect perception of the policy's features, benefits, or limitations. This can lead to misunderstandings and potentially incorrect assumptions about the coverage, affecting the contract's validity and the trust between the parties involved.

In contrast, providing clear information about a policy, explaining coverage details accurately, and offering advice based on policy limits are all practices that contribute to clarity and transparency in the insurance process, rather than deception. These actions align with the ethical standards expected in the industry and help ensure that consumers make informed decisions about their insurance needs. Misrepresentation undermines this process and can have legal consequences.