The legal remedy that cancels an insurance policy retroactively because of misrepresentation is rescission.
Rescission unwinds a contract and aims, where possible, to restore the parties to their pre-contract positions. In insurance, an insurer may seek rescission or treat a policy as voidable when the applicant concealed a material fact, made a material misrepresentation or breached an important warranty.
The remedy is different from ordinary cancellation or non-renewal. Cancellation usually ends a policy from a stated date onward, while non-renewal means the insurer declines to continue coverage after the current term. Rescission addresses a defect in the formation of the contract and can reach back to its beginning, subject to applicable law.
Rescission is not automatic in every dispute. Legal systems may impose requirements involving materiality, reliance, notice, timing, restitution and whether the insurer affirmed the policy after discovering the misrepresentation. In some cases, courts can deny rescission or substitute damages, so the exact effect depends on the jurisdiction and facts.