Reformation of Insurance

In certain instances, details of insurance policy may be subject to change. This is known as reformation of an insurance policy. This can occur in an automobile, homeowner's, life, commercial, or any other type of insurance policy.

Definition

A reformation of an insurance policy is a process that allows an insurance company to completely or partially restructure the policy language for the sake of accuracy.

When Necessary

A reformation of an insurance policy may be necessary when imprecise information is listed in the policy due to negligence, misrepresentation, general error or oversight. Deceitful conduct by the insured or insurer can also result in reformation. If one of these situations occurs, a court may order an insurance policy reformation so the policy will state the accurate details.

Example

According to the International Risk Management Institute, an insurer could seek reformation if a professional covered by a liability policy minimized his business' annual revenues to get a lower insurance premium.

References

• IRMI: Reformation of an Insurance Policy