If a policyholder is found to have not disclosed a material fact, which situation may arise?

When a policyholder fails to disclose a material fact, the most likely outcome is that the policy may be voided. This principle is rooted in the concept of utmost good faith, or "uberrima fides," which is fundamental to insurance contracts. Insurers rely on the honesty of policyholders to assess risk accurately and determine the terms of their coverage.

If a material fact—something that would influence an insurer's decision to provide coverage or the terms of that coverage—is not disclosed, it can significantly alter the risk assessment. In such cases, insurers may choose to void the policy altogether, as they entered the contract based on incomplete or misleading information. This action protects the insurer from potential losses that could arise from the undisclosed facts that would have influenced approval or the conditions of the policy if they had been known.

The other choices involve scenarios that contradict the principles of insurance underwriting; for example, doubling benefits, automatic renewals, or making no changes would not logically address the breach of contract stemming from nondisclosure of material facts. Thus, voiding the policy is the appropriate and just response to maintain the integrity of insurance agreements.