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Non disclosure of material facts
26 Dec 2016 (90 views)

When you apply for a life or health insurance policy, you have to submit an application form and answer all the questions truthfully. If you fail to do so, the insurance company has the legal right to void the policy and refuse to pay a claim on the grounds of non-disclosure of material facts. 

The problem is that the applicant may not be aware about a medical condition or may not be aware about what are material needed to be disclosed. The applicant usually relies on the agent to assist in completing the application form. The agent may consider some facts to be immaterial and do not ask these questions. 

When the insurance company rejects a claim on the ground of non-disclosure, the policyholder is not able to prove that the agent did not ask the question or the agent decided not to provide the fact in the application form. This is highly risky for the policyholder.

Here are examples of rejection of medical insurance claim due to non-disclosure:

a) An elderly lady was asked by the agent to upgrade her medical insurance policy to a better plan. The agent helped the policyholder to complete the upgrade form. Later, the policyholder was hospitalized for cancer. Her claim was rejected on the grounds that she did not disclosure that he had diabetes (which was not related to the cancer). She was not educated and the agent did not ask her about this matter.

b) An elderly man was asked to upgrade his medical insurance policy. He was later hospitalized for a medical condition. His claim was rejected on the ground that he did not disclose that he suffered from hypertension. The insurance company had checked with the government clinic. The doctor said that the patient was diagnosed for hypertension ten years earlier. However, the patient said that he was not told about his medical condition at that time and he was not given any prescription to treat the hypertension.

The rejection of the claim on both occasions was unreasonable. In a life insurance policy, there used to be a clause stating that the insurance company may not reject a claim on the ground of non-disclosure after one year, unless there is proof of fraud.  This clause, if present, would not allow the insurance company to reject the claim.  However, I have not seen this clause in the insurance policies that are issued in recent years. 

The policyholder pays a high premium to be covered for life and health insurance. It is quite worrisome that their claim can be rejected due to non-disclosure of material facts, when the non-disclosure is due to ignorance and to a mistake. The agent has a duty to ensure that the policyholder is advised to provide all relevant and material answers. However, the agent may want to hide some of these facts to allow the application to be accepted.




 


Non disclosure of material facts
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When you apply for a life or health insurance policy, you have to submit an application form and answer all the questions truthfully. If you fail to do so, the insurance company has the legal right to void the policy and refuse to pay a claim on the grounds of non-disclosure of material facts. 

The problem is that the applicant may not be aware about a medical condition or may not be aware about what are material needed to be disclosed. The applicant usually relies on the agent to assist in completing the application form. The agent may consider some facts to be immaterial and do not ask these questions. 

When the insurance company rejects a claim on the ground of non-disclosure, the policyholder is not able to prove that the agent did not ask the question or the agent decided not to provide the fact in the application form. This is highly risky for the policyholder.

Here are examples of rejection of medical insurance claim due to non-disclosure:

a) An elderly lady was asked by the agent to upgrade her medical insurance policy to a better plan. The agent helped the policyholder to complete the upgrade form. Later, the policyholder was hospitalized for cancer. Her claim was rejected on the grounds that she did not disclosure that he had diabetes (which was not related to the cancer). She was not educated and the agent did not ask her about this matter.

b) An elderly man was asked to upgrade his medical insurance policy. He was later hospitalized for a medical condition. His claim was rejected on the ground that he did not disclose that he suffered from hypertension. The insurance company had checked with the government clinic. The doctor said that the patient was diagnosed for hypertension ten years earlier. However, the patient said that he was not told about his medical condition at that time and he was not given any prescription to treat the hypertension.

The rejection of the claim on both occasions was unreasonable. In a life insurance policy, there used to be a clause stating that the insurance company may not reject a claim on the ground of non-disclosure after one year, unless there is proof of fraud.  This clause, if present, would not allow the insurance company to reject the claim.  However, I have not seen this clause in the insurance policies that are issued in recent years. 

The policyholder pays a high premium to be covered for life and health insurance. It is quite worrisome that their claim can be rejected due to non-disclosure of material facts, when the non-disclosure is due to ignorance and to a mistake. The agent has a duty to ensure that the policyholder is advised to provide all relevant and material answers. However, the agent may want to hide some of these facts to allow the application to be accepted.