When might an insurer refuse to pay a claim based on a condition of the policy?

An insurer may refuse to pay a claim based on a condition of the policy if the insured was not honest during the application process. This situation typically involves misrepresentation or nondisclosure of material facts. When applying for insurance, applicants must provide accurate and complete information; failing to do so can lead to the insurer being misled about the risk they are covering.

Honesty is crucial because it allows the insurer to accurately assess the risks associated with insuring an individual or entity. If the insurer discovers that the insured intentionally withheld information or provided false information that affects the underwriting decision, the insurer has the right to deny a claim. This principle helps maintain the integrity of the insurance system, as it ensures that all parties act in good faith and that premiums are set based on true risk levels.

In contrast, while the other choices may relate to situations where an insurer could potentially refuse a claim, they do not necessarily fall directly under the condition of misrepresentation. For example, negligence may affect liability but does not inherently breach a policy's terms; late premium payments may lead to coverage lapses but are often subject to grace periods; and a lapse in coverage is not directly linked to dishonesty at the application stage.