If a policyholder does not disclose relevant health information during their application, what might be a consequence?

When a policyholder fails to disclose relevant health information during the application process, one potential consequence is that the policy might be voided. Insurance contracts are based on the principle of utmost good faith, meaning both the insurer and the insured must disclose all material facts. If a policyholder withholds information that could affect the insurer's decision to offer coverage or determine the terms of that coverage, the insurer has the right to void the policy. This means they may refuse to pay out any claims related to that coverage, as the foundation of the contract has been compromised.

This situation emphasizes the importance of complete transparency when applying for insurance, as it protects both the insurer's and the policyholder's interests. When the relevant health information is omitted, the insurer cannot accurately assess the risk involved, which could lead to significant financial implications down the line. In contrast, the other options suggest beneficial outcomes or automatic increases in coverage, which do not align with the ramifications of nondisclosure.