What is 'duty of disclosure' in insurance?

The concept of 'duty of disclosure' primarily refers to the requirement placed on the policyholder to provide all relevant information to the insurer when applying for insurance coverage. This obligation ensures that the insurer has a complete understanding of the risks associated with the policyholder, allowing for an accurate assessment of risk and appropriate pricing of the insurance policy.

When a policyholder applies for insurance, they are expected to disclose any material facts that could influence the insurer's decision to provide coverage or determine the terms of that coverage. Failure to disclose relevant information can lead to complications, such as the insurer being able to void the policy or reject claims based on the nondisclosure. This principle is fundamental to the principle of utmost good faith in insurance contracts, emphasizing honesty and transparency in the insurer-policyholder relationship.

In contrast, the other options focus on aspects that do not accurately define the duty of disclosure. For example, the obligation of insurers to provide information to policyholders pertains to transparency and communication but does not describe the policyholder's responsibility. Evaluating claims after an incident and the legal rights of insurers to refuse claims relate to claims handling processes and coverage disputes, which are separate from the initial disclosure obligation during the application phase.