State RegulationsCA specific✓ Verified · outline & fact-checked · Sep 2026Difficulty 2/5
An insurer discovers that an applicant concealed a material medical condition and rescinds the policy. Which statement correctly describes the effect of rescission as compared with cancellation?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Rescission treats the contract as if it never existed: the policy is void from inception and premiums are returned, restoring both parties to their pre-contract positions. It is the remedy California law allows when a material fact was concealed or misrepresented at application. Cancellation, by contrast, terminates coverage going forward from the cancellation date and does not unwind what already happened. Distinguishing the two remedies matters because each has different consequences for premiums and past claims.
Why the other options are wrong
- B) Cancellation is prospective only; only rescission reaches back to the contract's beginning.
- C) The two remedies are reversed; rescission is the retroactive one and cancellation is prospective.
- D) Rescission is the remedy for material concealment or misrepresentation; cancellation, not rescission, is the remedy for nonpayment.
Memory hook
Rescission erases the contract's birthday; cancellation just switches off the future.