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The correct statement highlights an important principle in insurance: the concept that an agent’s knowledge is in effect considered the knowledge of the insurer. This means that if an agent is aware of specific facts or circumstances, it is assumed that the insurer also knows about these details. This principle serves to protect both the insured and the insurer; it ensures transparency and fairness in the transaction.

For example, if an insurance agent knows about a pre-existing condition of a client and fails to disclose it to the insurer, that knowledge is still imputed to the insurer, which could influence their risk assessment and underwriting decisions. This presumption reinforces the responsibility of agents to provide complete and truthful representations when dealing with clients.

In contrast, while it is essential for an agent to inform the insured about policy details, especially limitations and exclusions, the assertion that an agent must inform the insured of all details is not strictly true, as it depends on the specific requirements set forth in the agency agreement and legal mandates. Moreover, agents are indeed permitted to discuss policy limitations, as this is a crucial part of their role in helping clients understand the products they are purchasing. Lastly, the idea that an agent's knowledge is not relevant to the insurer does not align with established insurance practices, as