Voidable Contract

Definition - What does Voidable Contract mean?

A voidable contract, in the context of insurance, is a valid insurance contract that can be rendered void. In contrast to a void contract, it has the same legal effect and force as a valid contract.

Insuranceopedia explains Voidable Contract

Insurance contracts are often voidable to protect the insurer. Insurance companies may repudiate a policy if the insured fails to pay their premiums, becomes a higher risk, or is found to have lied on their application. Similarly, a policyholder could also stop paying, thereby failing to meet the terms of the contract and voiding it. Other reasons that could make a contract voidable include the following:

  • Non-disclosure of one or more material facts
  • Misrepresentation or fraud
  • Mistake on both sides i.e., a mutual mistake
  • Lack of free will of a contracting party or undue influence
  • One party's legal incapacity to enter a contract
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