General Insurance✓ Verified · outline & fact-checked · Sep 2026Difficulty 1/5
Which statement accurately describes the doctrine of utmost good faith in insurance contracts?
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Answer & full 3-part explanation (select an option above, or peek)
Why A is correct
Insurance is a contract of utmost good faith: the applicant must truthfully disclose material facts so the insurer can evaluate the risk, and the insurer must deal fairly and honestly with the applicant in return. The duty is mutual and applies throughout the transaction, but it is limited to material matters — not every detail of the applicant's life. This principle underlies the laws of concealment and representation.
Why the other options are wrong
- B) The duty binds both sides; the insurer must also act in good faith, for example by not concealing material rating rules or policy conditions.
- C) Only material facts must be disclosed; the standard is not complete self-exposure of every personal detail.
- D) The duty governs the application and contract formation, not merely the claims stage.
Memory hook
Utmost good faith is a two-way street, but it stops at material facts. Honesty matters, trivia does not.