What typically causes an insurance policy to be made void without a refund?

Submitting a fraudulent claim leads to an insurance policy being made void without a refund because it violates the fundamental principle of utmost good faith (uberrima fides) that governs insurance contracts. This principle requires both parties, the insurer and the insured, to act honestly and transparently. A fraudulent claim undermines this trust, as it involves the insured deliberately providing false information or omitting crucial facts to gain an undeserved benefit from the insurer.

When a claim is deemed fraudulent, the insurer has the right to void the policy from inception, meaning that they can refuse to pay any claims and also retain the premiums that have been paid. This serves as a deterrent against dishonest practices within the insurance industry, ensuring that those who act in bad faith do not benefit at the expense of honest policyholders.