Which of the following statements is true about misleading information in household contents insurance policies?

Household contents insurance policies are designed to protect policyholders from losses related to their personal belongings within their home. When a policyholder provides misleading information, it can compromise the integrity of the entire insurance contract.

The correct understanding here is that misleading information gives the insurer the right to avoid the policy. This means that if an insured party is found to have provided false information—whether intentionally or unintentionally—the insurer can legally choose not to honor the policy or deny any claims made under it. This principle is based on the doctrine of utmost good faith, which requires both parties in an insurance contract to act honestly and not mislead one another.

In contrast, the other choices suggest scenarios where misleading information either upholds the validity of the policy, obliges the insurer to provide coverage, or does not influence the premium, which does not align with general insurance law principles. The essence of the insurer's rights in the face of misleading information is a form of protection against fraud and ensures that the information used to assess risk and determine premiums remains accurate and truthful.