Which of the following best describes a financial consequence of misrepresentation?

The financial consequence of misrepresentation in insurance primarily manifests as policy cancellation. Misrepresentation occurs when an insured party provides false or misleading information during the application process, which can significantly alter the insurer's ability to assess risk accurately. When an insurer determines that important information was misrepresented, it may invalidate the contract based on the premise that the policyholder did not enter into the agreement truthfully. This leads to policy cancellation, as the insurer can choose to void the contract entirely because it was based on inaccurate representations.

In contrast, higher premium costs generally arise from legitimate risk assessments rather than misrepresentation. Requests for additional medical exams and increased commission rates are also not direct consequences of misrepresentation; instead, they may relate to underwriting practices and sales incentives linked to the information provided during the application process. Understanding the implications of misrepresentation emphasizes the importance of providing accurate information to maintain the validity of an insurance policy.