Insurance might not be the most exciting thing to talk about, but if you’re applying for life insurance or any personal insurance, there’s one key rule you need to understand: you must take reasonable care not to make a misrepresentation.
That’s a mouthful – what does it actually mean? In plain English: when an insurance company asks you questions on an application, you have to answer them honestly and completely. You don’t have to volunteer random information, just make sure what you do tell them is true and nothing important is left out.
Why This Matters:
In the past, insurance law said you had a “duty of disclosure,” which basically meant you had to tell the insurer anything that could be relevant, even if they didn’t ask. This was confusing – how would you know what’s relevant? People trying to be honest could still get tripped up and have claims denied for not disclosing something they never realized they should mention.
Now the law has changed to be more fair. Insurers must ask clear questions, and it’s your duty to answer those questions with reasonable care. If you do that, you’ve done your part.
What You Should Do:
Here’s how to meet your duty and protect your coverage:
- Pay attention to every question on the form. They’re asking for a reason. Common areas include your health history, medications, lifestyle (smoking, hobbies), and financial details (for income protection). Make sure you address each one.
- Answer truthfully and fully. Don’t lie, obviously. But also, don’t hold back details. For example, if a question asks “Have you ever had any surgery?” don’t say “no” just because you think it was minor – if you had your appendix out, that counts. Say “yes” and give the basics (e.g., “appendix removed in 2015, full recovery”). Providing the extra detail is taking reasonable care; it shows you’re not hiding anything.
- If you’re unsure, err on the side of telling them. Sometimes you might think, “Is this relevant? They didn’t specifically ask for it.” If there’s a field where it could fit, it’s usually better to include it. You won’t get in trouble for oversharing – the insurer can always ignore stuff that doesn’t matter. But if you leave out something that does turn out to matter, it could cause issues later. For instance, if you see a therapist a couple of times for stress, and the form asks about mental health treatment, mention it, even if it was minor. It’s okay if it was mild – the important part is you answered the question.
- Ask questions if you need to. The adviser helping you (or the insurer’s rep) is there to clarify. Terms like “condition” or “treatment” might seem obvious but can be technical. If you’re not 100% sure what a question means, don’t guess – ask! For example, “Does high cholesterol count as a heart condition?” They can guide you. It’s way better to clear up confusion now than to guess wrong.
- Double-check the form. Before you sign, review everything. People often forget something (maybe you remembered later that you visited a physio last year). You usually have up until the policy approval to add/correct info. Just let them know – insurers update your file, and it’s no problem (it happens all the time).
- Update any changes before the policy starts. If there’s a few weeks processing and during that time you see a doctor or find out something new about your health, tell the insurer. For example, you apply in January and in February (before it’s issued) the doctor tells you your blood sugar is high – mention it. That way, your policy will be based on the latest info and there’s no grey area.
What Happens If You Don’t Take Care:
If you misrepresent – meaning you give a false answer or leave out key info – the danger is that your policy might not protect you when you expect it to. Depending on how serious the misrepresentation is, an insurer could:
- Cancel your policy as if it never existed (if they find the issue early on and it’s something that would have made them decline cover).
- Pay a reduced benefit or adjust the terms. For example, if you said you didn’t smoke but you do, and a claim arises, they might reduce the payout to what it would be if you’d paid smoker premiums.
- Decline a specific claim. If the claim is related to something you didn’t disclose, they might refuse it. E.g., you failed to mention a past knee surgery, and later you claim for a knee injury – they might not pay that claim because of the non-disclosure.
The law now tries to make this fairer: insurers can’t void your whole policy for an honest mistake unless it’s so critical that they’d never have insured you at all. And if it’s been more than 3 years and you didn’t lie on purpose, they generally can’t cancel your life insurance policy just because of something you didn’t mention.
But the easiest way to avoid ALL these issues is: tell the truth, tell the whole truth, and nothing but the truth! If you do that, you can feel confident your cover will hold up when you need it.
Good News:
The good news is that with this new duty, it’s actually simpler for you:
- You focus on answering questions, instead of guessing what to disclose.
- Insurers are asking more straightforward questions (because they have to).
- If you act in good faith and take your time, the law is on your side. You won’t be punished for a simple oversight as long as you did take reasonable care.
Quick Tips Recap:
- Be honest. Small lies can lead to big problems later. It’s not worth it.
- Be thorough. Think of the insurer as your doctor – you wouldn’t hide things from your doctor; treat the insurer the same when sharing info.
- When in doubt – disclose. That motto will serve you well.
- Keep notes. It’s okay to keep a copy of what you complete. It helps if you ever have to recall what you said.
By following these steps, you help ensure that when you claim, your insurance will do exactly what you expect – pay out and protect you. The whole point of this change in law is so claims aren’t denied on technicalities when people have been honest. So, embrace the new duty as a positive thing: it protects you as long as you uphold your end of the bargain by being truthful and careful in the application.
If you have an adviser, lean on them for help – part of their job is to guide you through this process. They can’t answer for you, but they can make sure you understand every question and that you don’t accidentally skip something important. As a client, your mantra should be: “I will answer every question accurately and completely.” Do that, and you can rest easy that you’ve done the right thing and your insurance will be there for you when it counts.
