Rescission

What Does Rescission Mean?

Rescission is an official declaration by a party in an insurance contract stating that they no longer recognize the contract as valid.

This typically occurs when a policyholder is found to have provided fraudulent information on their application.

Insuranceopedia Explains Rescission

Rescission can occur when a policyholder is found to have provided fraudulent information on their application. Likewise, misrepresentation or fraud by the insurer is a valid reason for the insured to rescind a contract.

Under the Affordable Care Act, fraud is the sole reason an insurance company can rescind a policy. Additionally, the fraudulent information must have caused an error in premium pricing.

When a contract is rescinded, the insured is notified by the insurer and receives a refund of the premiums paid.