Furthermore, insurers are free to deny policies to persons who present an unacceptable risk. For example, most insurance companies do not offer life or health insurance to persons who have been diagnosed with a terminal illness. Claims The most common issue in insurance disputes is whether the insurer is obligated to pay a claim. The determination of the insurer's obligation depends on many factors, such as the circumstances surrounding the loss and the precise coverage of the insurance policy. If a dispute arises over the language of the policy, the general rule is that a court should choose the interpretation most favorable to the insured.
Many insurance contracts contain an incontestability clause to protect the insured.
This clause provides that the insurer loses the right to contest the validity of the contract after a specified period of time. An insurance company may deny or cancel coverage if the insured party concealed or misrepresented a material fact in the policy application. If an applicant presents an unacceptably high risk of loss for an insurance company, the company may deny the application or offer prohibitively high premiums. A company may cancel a policy if the insured fails to make payments. A company may refuse to pay a claim if the insured intentionally caused the loss or damage.