Canny View: Get insurance application right or blow your cover

Trudi Vossen

When you apply for personal-risk insurance, the insurer seeks answers to questions about your health, occupation and insurance needs.

This is so that the insurer can assess the likelihood of you making a claim and to assess the premium cost. You must answer all questions completely and honestly.

If you don't, the insurer is entitled to refuse a claim on the grounds of "non-disclosure", with or without a return of your premiums.

In this week's Canny View, I'm sharing my thoughts on the importance of full disclosure to your adviser when completing an insurance application, what you should do if you are unsure whether to disclose something or not and how having an insurance adviser helps when applying for cover with insurance.

The life insurance industry has proudly protected the financial wellbeing of New Zealanders for more than 150 years, paying close to $1 billion annually in claims.

Most claims are accepted and paid without question or further inquiry.

Of the remaining claims, there are two main reasons why they are investigated or not upheld:

• the policy document didn't cover the specific condition you are seeking to claim on
• the life insured failed to disclose details of existing or past medical conditions on their application, even if this was an innocent oversight

It is your legal responsibility to fully and accurately answer all questions about your medical and personal history on the insurance application form.

Failing to disclose relevant information is one of the main reasons why claims are not upheld.

When you apply for cover, the insurance underwriter uses the information you provide to decide what the insurer will cover you for and how much it will charge you for that cover.

The information you provide forms the basis of your insurance contract.

This obligation on you to tell the insurer about the information is often referred to as your "duty of disclosure".

If in doubt, you should give all information to the insurer for consideration.

The disclosure duty exists not only when the insurance is being applied for but also while the insurer is underwriting your application.

The most common thing people fail to disclose is a pre-existing medical condition.

In many cases, people accidentally leave out information because they have forgotten, or do not consider it is important.
 
For example, a trauma insurance claim for melanoma was declined because when the client applied for insurance, they had omitted to disclose that they had previously had a melanoma removed some years ago.

If the insurer had been made aware of this at the time of applying for insurance, this condition would have been excluded from the cover of the policy.
 
Insurance advisers have a key role to play in educating clients about their duty of disclosure, what information is material, and the consequences of failing to disclose.

Impartial insurance advice from an insurance adviser is vital and provides value for money cover, sensitivity, and professionalism when dealing with personal information and peace of mind.

• Trudi Vossen is an authorised financial adviser (FSP502506) and Head of Risk Management at Stewart Financial Group. Stewart Group is a Hawke's Bay-owned and operated independent financial planning firm based in Hastings. This article represents general information only. Before making any financial or investment decisions, we recommend you consult a financial planner to consider your investment objectives, financial situation, and individual needs. A disclosure statement can be obtained free of charge by calling 0800 878 961.