Because of the generally mandatory nature of motor vehicle insurance in the United States, a prospective insured under a policy of auto insurance may well feel pressure to tell an insurer whatever needs to be said in order to obtain the coverage that will permit him or her to operate a car or truck on the public roads. Insurers often discover after they issue a policy that an insured has, in the course of making application for a policy of insurance, misrepresented facts, for example, facts about the insured's driving record, that were material to the insurer's decision on whether to issue a policy to the insured, and the insurer may accordingly wish to cancel a policy it has entered into under such circumstances.

The mandate of insurance coverage, however, and the very sense of necessity that caused the prospective insured to misrepresent his or her situation in the first place, may complicate the issue of the insurer's freedom to cancel a policy thus undertaken, because the first priority of the governmental authorities that monitor matters of insurance coverage is seeing to it that innocent third parties are afforded insurance protection if they are involved in accidents with vehicles operated by persons who are ostensibly covered by insurance while operating those vehicles on the streets and highways. While an insurer may sometimes cancel a policy for misrepresentations made during the application process, the insurer's right to do so may be limited by legal principles that take into consideration such things as the nature and extent of the misrepresentations made, the insurer's own diligence in determining the true facts of the situation, and the consequences for innocent third parties who have in effect placed their reliance on the insurer's action in issuing a policy whose issuance it has now come to regret.

The business of insurance in the United States, including that of motor vehicle insurance, has traditionally been governed by the individual laws of each state rather than by a single unified body of federal law. The answers to questions concerning an insurer's right to cancel an auto insurance policy for misrepresentations made by an insured during the application process will therefore vary from state to state, and will be found in the state statutes regulating the business of insurance and in the decisions of courts dealing with matters of insurance law.