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Hiding information can actually cost you your insurance plan

Sep 19, 2019 | 10 months ago | Read Time: 3 minutes | By iKnowledge Team

The one question that people get stuck at in their insurance policies is disclosing their health. To many people, disclosing their health and fitness levels to their insurance company may be embarrassing, but it turns out to be beneficial to the policyholder in the long run.

Not everyone is transparent while filling up their insurance policies. Some are simply ignorant about filling in proper details and can declare inaccurate information while purchasing  life insurance plans. Some policyholders tend to incorrectly disclose information about pre-existing diseases.

According to a survey by Economic Times, 22% of the respondents said they would either not mention their illness or would take an agent’s help to reduce the severity. Around 8% of the respondents said they would not disclose the full extent of the problem [1].

Image source: Economic Times

The first question that an insurance company asks a policyholder is whether is a smoker or not. Based on this question, the insurance company calculates the risk of insuring the policyholder and gives out a premium. Typically, the insurance premiums for a term plan are 15-40% higher for smokers.

Thus, the temptation for a policyholder to misdeclare his health, the pre-existing diseases, or medical issues treated in the past is very high. By misdeclaring, the policyholder saves premium. But this strategy is wrong. Insurance companies have ways to find out the condition of your health. Several insurance companies insist on mandatory health checks before accepting the life insurance policy. These health check documents are analyzed by a team of medical experts before the policy is approved.

Declaring every aspect of your health clearly to the insurance company will only result in a more transparent agreement. This will not lead to any problems when your family will make a life insurance claim. Hiding information from your insurance company can lead to your claim getting rejected.

Another point to be considered is that it is not only information about health that can be hidden, but also information about occupation, income, and age. Most life insurance plans honour claims partially if the age is misrepresented. The method they use to calculate is whether the actual age of the insured would be covered by insurance or not.

People who work in hazardous conditions, or those who require extensive travel, or those working in factories have a greater chance of contracting health problems and consequently. Therefore, their life and health insurance premiums are higher. Misdeclarations can lead to claim rejections. Insurance companies have clauses in their contracts that allow them to seek professional expertise to verify the genuineness of the claim. This can catch any untruths told in the life insurance policy.

Why is truthful disclosure necessary?

At the very base of it, an insurance policy is a contract between the insurance company and the policyholder. There is an obligation on you to disclose information as truthfully and completely as possible. However, there is a section under the Insurance Act, 1938 that deals with fraud and misrepresentation.

As per Section 45 of the Insurance Act, 1938,

“No policy of life insurance shall be called in question on any ground whatsoever after the expiry of three years from the date of the policy, i.e. from the date of issuance of the policy or the date of commencement of risk or the date of revival of the policy or the date of the rider to the policy, whichever is later”.

This section is beneficial to the policyholder because the insurance company has 3 years to repudiate the contract. If it hasn’t repudiated the contract by then, the life insurance policy holds good. But, this does not mean that misdeclarations of health can be escaped.

Some life insurance companies will cover you even if you have declared your medical problems. Declaring them honestly will ensure you can get life insurance even if you have suffered from critical illnesses such as a stroke.

To avoid any of these problems, it is best to honestly declare your health, your occupation, your income, and any other information asked in the insurance policy document. In case you are a smoker and then quit smoking during the policy term, you can inform your insurance company and they may reduce your premiums after a few years as well.

To ensure financial safety, buy term life insurance plans from reputed insurers who spell out every condition in their policy. Aegon Life has a convenient online policy buying procedure which makes it easy for everyone to buy.

When you fill up your life insurance policy document, remember to disclose everything clearly. It always works in your benefit. To know about Aegon Life’s life insurance products like term insurance and other products, visit our home page.




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