A, an employee of a government organization purchased a life insurance policy on 28-4-2011. It was a non-medical scheme policy as he was an employee of government organization and no medical examination was conducted. Th

Insurance contract is an agreement between two parties based on certain principles which are essentials of an insurance contract. If any of the principles are not complied, then the contract is voidable at the option of the aggrieved party. 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 circumstance of the case as at the date of taking the policy and at the time of revival 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. Here in this case the person assured was required to state the facts about his health in the proposal form while taking the insurance policy. This is required under the very first and most basic principle of 'uberrimae fidei' or the principle of utmost good faith. According to this principle, the insurance contract must be signed by both the parties (i.e. insurer and insured) in an absolute good faith or belief or trust, both the insured and the insurer should have good faith towards each other. In the present case, the policy holder was suffering from epigastria C bleeding per rectum due to which the person died. The insured must provide the insurer complete and clear information of subject matter. In the case cited, the insured while signing the proposal form was required to give all the facts about his health which was an information material to the contract. The principle of utmost good faith very clearly state that the person getting insured must willingly disclose and surrender to the insurer the complete and true information regarding the subject matter of insurance. The insurer's liability becomes void (i.e. legally revoked or cancelled) if any facts about the subject matter of insurance are either omitted, hidden, falsified or presented in a wrong manner by the insured. Thus there was a clear case of non-disclosure of material facts regarding health conditions by the life assured. In a Contract of Insurance, any fact which would influence the mind of a prudent insurer in deciding whether to accept or not to accept the risk is a 'material fact'. If the proposer has knowledge of such fact, he is obliged to disclose it particularly while answering questions in the proposal form. Needless to emphasize that any inaccurate answer will entitle the insurer to repudiate his liability because there is clear presumption that any information sought for in the proposal form is material for the purpose of entering into a Contract of Insurance. On the basis of above discussion the Contract of insurance is void.