Insurance contracts are governed by the principle of uberrimae fidei (utmost good faith). The applicant must disclose all material facts relevant to the risk, even if not explicitly asked. Under the Ontario Insurance Act, R.S.O. 1990, c. I.8, and equivalent provincial statutes, a material misrepresentation or concealment by the applicant may entitle the insurer to void (rescind) the contract.
What is material? A fact is material if a reasonable insurer would consider it in deciding whether to accept the risk, on what terms, or at what premium. A prior diagnosis of diabetes, a recent hospitalization, or a pending diagnostic investigation would all be material to an A&S underwriter.
Incontestability clause: most A&S policies include an incontestability provision stating that after the policy has been in force for two years (the contestability period), the insurer cannot void the policy for misrepresentation, unless the misrepresentation was fraudulent. Within the two-year period, the insurer may investigate and rescind. After two years, only fraud permits rescission.
Advisor obligation: the advisor must explain the application questions clearly, ensure the client understands what must be disclosed, and never encourage a client to omit information. Facilitating a misrepresentation exposes the advisor to regulatory discipline and potential personal liability.