Under which condition can an insurer amend contract terms upon discovering a misrepresentation?

The correct response centers on the principle of materiality in insurance contracts. An insurer can amend contract terms upon discovering a misrepresentation when the misrepresentation affects the risk assumed. This is because a misrepresentation can fundamentally alter the insurer's understanding of the risk involved in underwriting the policyholder's coverage.

If a misrepresentation is material, it indicates that the insurer would have made different underwriting decisions had the correct information been provided. In these cases, adjusting the terms of the contract is seen as a necessary response to rectify the altered understanding of the risk. This adjustment aligns with the fundamental principles of honesty and full disclosure that govern insurance contracts.

In contrast, the other conditions do not typically justify an amendment to the contract terms in the same way. While the policyholder's agreement might be useful, it is not a necessary condition since the situation arises from the misrepresentation rather than mutual agreement. The intentional nature of the misrepresentation can also influence the insurer's response, but it’s the material impact on the risk assumed that directly connects to the ability to amend terms. Termination of the policy is a separate action that the insurer may take for breaches but does not correspond to amending contract terms. Thus, the correct answer reinforces the need to address misrepresent