In insurance contracts, which principle requires disclosure of all material facts by both parties?

• A. Utmost good faith
• B. Good faith
• C. Consideration
• D. Waiver

Answer: (A)

Utmost good faith, or uberrimae fidei, is the principle that underpins insurance contracts because there is an inherent information gap between the insured and the insurer. This doctrine requires both parties to reveal all material facts that could influence the decision to issue the policy or set its terms. For the insured, that means truthfully disclosing known information that could affect risk—like health issues, dangerous activities, or recent claims. For the insurer, it involves being clear and honest about what the policy covers, its exclusions, and how premiums are determined. When either side conceals or misrepresents important facts, the contract can be voided or a claim could be denied, because the bargain was not based on full and accurate information. The other options don’t capture this formal duty: while good faith is a general idea, insurance law specifically uses utmost good faith to address the information asymmetry; consideration is the exchange of value in a contract; and waiver is the voluntary relinquishment of a known right.