Why is it important that the application is the basis of the policy?

The completed application is indeed the foundation of the policy contract, making it essential for the following reasons. It provides the insurer with critical information about the applicant, which helps the company assess the risk involved in insuring that individual. Based on the details submitted in the application, the insurer can determine whether to accept or decline the policy and, if accepted, the terms of coverage including premiums. The accuracy and honesty of the information in the application are crucial, as any misrepresentation or omission can lead to complications such as policy voiding or claims being denied. Therefore, the application serves not only as a record of the agreement but also as a key tool for underwriting decisions, emphasizing its vital role in the insurance process.