Voidable Contract
Updated: 20 December 2024
What Does Voidable Contract Mean?
A voidable contract, in the context of insurance, is a valid insurance contract that can be rendered void. Unlike a void contract, it holds 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 void a policy if the insured fails to pay premiums, becomes a higher risk, or is found to have misrepresented information on their application. Similarly, a policyholder may stop paying premiums, thus failing to meet the terms of the contract and rendering it void. Other factors that could make a contract voidable include:
- Non-disclosure of one or more material facts
- Misrepresentation or fraud
- Mutual mistake
- Lack of free will by a contracting party or undue influence
- One party’s legal incapacity to enter into a contract
