Insurance contract works on certain principles (you can read all here - http://www.policywala.com/forum/show...s-of-Insurance), the first of them is -
Utmost Good Faith -
One of the basic and primary principles of insurance is Utmost Good Faith. It states that insurance contract must be made in absolute good faith on the part of both the parties. The insured must give to the insurer complete, true and correct information about the subject matter of the insurance. Material fact should not be hidden on any ground. This principle is applicable to all types of insurance contracts. Insurance is for protection and not for profit and hence, correct information must be given to the insurance company.
So as per above clause if the claimant (Policyholder, nominee or legal heir) with his knowledge make misleading, false claim, then the policy contract would be void. e.g. false representation of any info in the proposal form about pre-existing disease.