Definition - What does Rescission mean?
Rescission is an official declaration by a party in an insurance contract that they no longer acknowledge the contract as legal.
It takes place when a policyholder is found to have given fraudulent information on their application.
Insuranceopedia explains Rescission
Rescission can take place when a policyholder is found to have given fraudulent information on their application. Misrepresentation or fraud on the part of the insurer is also a valid reason for an insured to rescind a contract.
The Affordable Care Act cites fraud as the only reason for an insurance company to rescind an insurance contract. The fraudulent information entered in the application, moreover, must cause an error in premium pricing.
When a contract is rescinded, the insured receives a notice from the insurer. They also get the premiums back.