Dwelling Policy Practice Test

Under which of the following circumstances would an insurer be allowed to cancel a dwelling policy midterm?

1. The insured knowingly lied about the year the property was constructed

2. The property was declared a historical site

3. The insured made a claim for minor repairs

4. The property was upgraded to a higher value

The correct answer is: The insured knowingly lied about the year the property was constructed

An insurer can cancel a dwelling policy midterm if the insured knowingly misrepresented information when applying for coverage, such as lying about the year the property was constructed. This type of misrepresentation can significantly affect the insurer’s risk assessment and decision-making process. If the insurer discovers that critical information has been intentionally falsified, they have grounds to cancel the policy due to the breach of trust and the integrity of the application process. This situation emphasizes the importance of honesty in insurance applications, as the accuracy of the information provided influences coverage conditions and premium rates. In contrast, a property being declared a historical site typically does not trigger a cancellation of the policy midterm, as it may not alter the risk profile significantly enough to justify such action. Similarly, making a claim for minor repairs often falls within the normal use of insurance and would not typically lead to policy cancellation. As for upgrading the property to a higher value, that might actually warrant a policy adjustment rather than cancellation, ensuring that the coverage is adequate for the increased value of the property.