How does a policyholder demonstrate utmost good faith?

A policyholder demonstrates utmost good faith, known as ‘uberrima fides’ in insurance, primarily through complete disclosure of their health history. This principle requires that individuals provide all relevant information to the insurer when applying for coverage. Insurers rely on the honesty and transparency of the applicant to assess risk accurately, determine premiums, and provide the appropriate coverage. If a policyholder fails to disclose pertinent health-related information, they may be considered to have acted in bad faith, which can lead to denial of claims or cancellation of the policy.

Ensuring the insurance company is profitable is important from a business perspective but does not relate to the good faith expectations of the policyholder. Similarly, applying for insurance only when necessary refers to the policyholder's timing rather than their obligations in terms of disclosure. Selecting the lowest premium available does not demonstrate good faith, as it does not involve the transparent sharing of critical information that insurers need to provide coverage effectively.