What is required for contracts of insurance regarding material facts?

In contracts of insurance, full disclosure of material facts is essential. This requirement stems from the principle of "utmost good faith," or "uberrima fides," which governs insurance contracts. It mandates that both parties, particularly the insured, disclose all pertinent information that could influence the insurer's decision to provide coverage or determine the terms of the contract.

Material facts are those that would impact the judgment of a reasonable insurer when deciding whether to accept a risk or what premium to charge. If the insured fails to disclose such facts, the insurer may have grounds to void the policy or deny a claim. This standard emphasizes the trust and transparency necessary for the functioning of insurance agreements.

Verbal communication of facts is insufficient, as a contract requires comprehensive transparency. Likewise, only disclosing information when specifically asked or assuming that no disclosure is needed contradicts the duty of honest and full disclosure expected from the insured. Therefore, full disclosure of material facts is not merely a best practice; it is a legal obligation in insurance contracts to ensure fair dealings and mutual trust between insurers and the insured.