What is the legal significance of a material misrepresentation in an insurance application?

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What is the legal significance of a material misrepresentation in an insurance application?

A) The contract is automatically voided from its inception.
B) The contract is voidable at the insurer's option.
C) Loss payments are reduced by the degree of the misrepresentation.
D) The insurer is immediately entitled to a higher premium.

Answer: B) The contract is voidable at the insurer's option.

Insurance

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An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay?

An insured's building has an actual cash value of $200,000, and he has insured the property for $120,000 with an 80% coinsurance clause. A $40,000 loss occurs. How much will the policy pay? a) $0 b) $30,000 c) $32,000 d) $40,000 Answer: B

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