Void
A contract is void if it is illegal from the start – also called inherently void. A void contract cannot be accepted in a court of law and will be declared null by the courts; hence we refer to a policy that is null and void. A car insurance contract will be void if a fundamental principle is totally disregarded, for example, someone trying to insure his neighbour’s car. This is not allowed as it violates the insurance principle of having an insurable interest in the item being insured. A void contract is one which is void from the start and differs from a voidable contract.
A voidable contract, on the other hand, is where one of the parties to the contract chooses to have the contract declared void. A car insurance policy could have been in force for some time and constituted a totally legal contract. When the insured party files a claim and the insurance company discovers that the claim was fraudulent they can choose to declare the contract void from the time the fraudulent claim was made.
If the insurance company discovers that there was non-disclosure of material facts at the time the contract was agreed to it will have the right to declare the contract void “ab initio”, meaning from the beginning.