Sarah, a 30-year-old marketing executive in Ontario, applies for a $500,000 life insurance policy. During the application process, she truthfully declares that she was treated for depression five years ago but has been symptom-free since. The insurer subsequently declines her application based on this disclosure. Which core principle of insurance contract law has Sarah upheld, even though her application was declined?

Question: Sarah, a 30-year-old marketing executive in Ontario, applies for a $500,000 life insurance policy. During the application process, she truthfully declares that she was treated for depression five years ago but has been symptom-free since. The insurer subsequently declines her application based on this disclosure. Which core principle of insurance contract law has Sarah upheld, even though her application was declined?

Answer options: ✅ Utmost good faith

• Offer and acceptance
• Consideration
• Insurable interest

Correct answer: Utmost good faith

Explanation: Sarah has demonstrated utmost good faith (uberrimae fidei) by fully and truthfully disclosing all material facts relevant to the risk, even if it led to a negative outcome for her application. This principle requires both parties to the contract to act honestly.