General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insurer rescinds a life insurance policy because the applicant made a material misrepresentation in the application. With respect to the premiums the insured paid, the correct result is:
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Rescission treats the contract as void from the beginning — as if it never existed. Because the policy is void ab initio, the parties are generally restored to their original positions, which means the premiums the insured paid are returned. Rescission is not a penalty; it undoes the contract because the insurer's consent was obtained through a material misrepresentation.
Why the other options are wrong
- B) Rescission restores the status quo; it does not operate as a forfeiture of premiums.
- C) The insurer cannot keep the premiums and also refuse coverage; rescission unwinds the entire contract.
- D) There is no charitable disposition of premiums; they revert to the insured.
Memory hook
Rescind = rewind. Contract undone from day one, so premiums go back to the insured.