Keeping the facts and figures to self or not stating the truth while buying an insurance policy is a major blunder that many insurance seekers tend to indulge in. This makes it difficult for them to reap the benefits of insurance or file appropriate claims when needed.
An insurance policy is a long-term contract that is based on the Principle of utmost faith, which says that both the insured and the insurer will act honestly and reveal complete and accurate information to one another which is required under the contract being made. Not holding to this principle will result in the contract being considered as null and void.
Now let’s understand what is a material fact or information? Any information which is asked in a proposal form related to your age, occupation, health status, family history, pre-existing disease, other life insurance policies that you possess or any additional information which is imperative for the insurer to analyze the risk in your life before granting you life insurance.
Concealment or hiding may be sometimes unintentional or intentional. Most of the time, the agents fill up the proposal forms on your behalf and also may state wrong information or hide material information to offer you lower premiums. It is very important that you read and fill the proposal form by your own and in case you find any doubts or confusions in any field of the proposal form, then get in touch with the insurer to understand what is actually required to be filled. Proposal form forms the BASIS of Insurance.
Also, at times there is a moral hazard where in to seek undue advantage from insurance, people tend to conceal important information. Any concealment at the time of seeking insurance for any gains will cost you and your family at the time of claims and the insurer will consider the contract null and void resulting in repudiation of the claim on the basis of concealment. The entire intent of taking the insurance policy goes in vain.
Since most people are not aware of the intricate workings of the insurance sector, they only focus on ways to get their premiums lowered. They don’t realise that there are enough checks and balances in the system that no matter what kind of a lie you’re saying or whatever means you’re employing to hide information, it can’t suppress truth forever! Let’s have a look at some of the ways people hide information and why it’s not a smart idea:
1) Not giving out updated health condition or hiding past medical ailments is one of the commonest ways to try and get lower premiums. However, if you do get hospitalised or something happens to you, it won’t take time for insurance companies to find out the truth based on expert medical investigation resulting in the rejection of claims.
2) Tobacco use is common in our country, yet some people believe that they can hide it as no one is going to come to their house to check it. The fact is, even if you’re not using tobacco in any form for past 2-3 years, even then the insurer can find out about it. Science can help them find signs of smoking on their chest X-ray even if no nicotine is found in their blood stream! Better be upfront rather than risk claim rejection!
3) Some customers try to quote higher salaries to get a higher sum assured. However, insurance companies are nowadays employing the services of private investigators, who would find out everything about the background of the customer before they offer you a policy or process your claims.
4) A customer might be following a sedentary lifestyle that is risk-prone to life-threatening diseases but hides it from the insurer. As mentioned above, if the insurer has any doubts on the information published in the form, a private investigator will be on your tail immediately!
5) Insurance providers charge higher premiums for dangerous professions like coal mining and the likes. If you state a wrong profession, you might enjoy lower premiums when you’re alive, but it might boomerang when you aren’t around for your families!
6) Opting for policies that don’t ask for medical tests might look like a tempting proposition as you won’t have to reveal your real medical condition. However, those insurers charge a higher premium anyways, and if something happens to you, it’ll all come in the medical report that might result in claims rejection.
As you can see, you only gain in the short-term by hiding crucial information from insurance companies. In the long run, it is a terrible idea that will only give you losses. It is better to provide accurate information and pay higher premiums to benefit from the insurance policies in the real sense.