Although only one percent of life claims are rejected by insurers, during 2014 over 75% of those rejected claims failed because the policyholder did not disclose all his/her personal information, especially regarding pre-existing health conditions. This trend is worsening as the percentage in 2013 was 62%. When you take out an insurance policy, the responsibility lies with you to provide the insurer with all the necessary information in order for them to correctly assess and price your risk.
In this article 1Life takes a look at the risks involved when you are not completely honest – and how you can ensure that you do not withhold information.
The risk of non-disclosureWhen you take out a 1Life policy you will be asked many questions, and you should be aware of the need to answer in full. Typically the questions asked could include: medical history, smoking status, lifestyle, hazardous pursuits, occupation and income and if you have any existing life insurance policies.
‘Non-disclosure’ is a term you will hear often. It means an intentional failure to provide information about some aspect of your medical history or lifestyle in an attempt to benefit from lower monthly premiums or to obtain cover without exclusions.
Attempting to withhold information is very unwise. It is most likely that the information the policyholder withholds will become known when a family member is making a claim, resulting in reduced or rejected claims.
The latest statistics (for 2014) from the Association for Savings and Investment South Africa (ASISA), show that life insurance companies are not unreasonable – provided you are truthful and provide all the information they ask for. Only 1.1% of claims for death and disability were rejected last year. According to ASISA, the main cause of rejected claims was failure by the policyholder to disclose important information, including a pre-existing serious illness, at the time of taking out the policy.
How to answer underwriting questionsWhile a 1Life consultant will be there to assist, here are a number of tips to ensure you disclose everything you should, when applying for life insurance:
- Fill in all information yourself concerning your medical history and lifestyle and that of your immediate family. Don’t rely on someone else to do this for you
- Be completely honest in your answers, as you are unlikely to get away with false answers
- Be as detailed as possible when providing such information. Even if some information may seem unimportant, rather be safe than sorry and disclose it
- Be completely honest about your lifestyle habits, whether drinking (including drinking and driving), taking drugs or smoking
- Make very sure you understand the terms and conditions that apply to your policy
- If your occupation involves high-risk activities, such as mining or construction, you need to disclose this
Keep 1Life updated on your pre-existing conditionsWhile the major reason for rejection of claims last year was failure to provide information relating to the risk you pose to the insurer, another came from beneficiaries claiming for a pre-existing condition which had been specifically excluded in the policy.
It is quite common that insurers do not pay out in the event of death for such a pre-existing condition. So if you take out a life insurance policy after you have already been diagnosed with a serious health problem, your policy would not pay out for that condition – and don’t make the mistake of thinking that life insurers will not check. If there is any suspicion, your medical records held by your medical practitioner will be requested.
Buying and updating!It is important to provide 1Life with all the necessary information not only when you apply for life insurance but also when you increase your cover amount, for example when you get married or have children.
In addition, you must inform 1Life of any new diagnoses and/or any health changes that occur before the commencement date for new policies or effective date of change for amended policies. That way you will be one of the 98.9% paid out rather than one of the 1.1% rejected!
Lastly, do not overlook the Continuity of Cover clause in your policy which states that you must inform 1Life if you start or stop smoking, change jobs, leave the country for more than 14 days or start or increase your participation in a hazardous pursuit.