When you take out a new insurance policy, one of the most important things you need to do is answer all the disclosure questions on the application form. While some of them might not seem relevant, to make sure you’re properly covered, it’s vital you answer them all truthfully and completely.
This is because the insurance company’s underwriters will use your answers to decide whether they can cover you, and to calculate the terms of the insurance policy they offer you. If you omit anything that might affect their decision, either on purpose or by accident, it will likely result in future claims being declined, or the entire policy being “avoided” (which means it is treated as if it never existed).
Here are five things that people often neglect to tell their adviser when they’re applying for insurance:
1. Previous claims history
The number of claims you’ve made helps the insurer work out your risk profile. If you’ve made a lot of burglary claims, it could indicate that you live in an area prone to theft, or that your property is not secure. Multiple motor vehicle claims may suggest that you have a history of bad driving.
2. Modifications to a vehicle
If you’ve installed a state-of-the-art sound system or high-end mag wheels, this will make your car more attractive to thieves, and therefore more likely to be broken into or stolen.
3. Criminal convictions
An insurer needs to know if you have any prior convictions to assess what kind of insurance risk you pose. For example, they may not wish to offer house and contents cover to someone with convictions for drug manufacturing or arson.
4. How your property is used
If you run a business from your home, your insurer will need to know. This is because you may have many people (clients) visiting your home, or you could be storing materials on-site that present an insurance risk.
5. Previous insurance issues
If another insurer has refused to cover you, cancelled your policy, or imposed special conditions on it, an underwriter will need to know why.
Ten percent of all complaints to the Insurance & Financial Services Ombudsman involve non-disclosure issues. If you have information that you think is likely to affect an insurer’s decision to cover you, mention it to your advisor. While disclosing past issues could mean that your insurance will have special conditions applied to it, or that your premiums will be higher, it will drastically increase your chances of making a successful claim in the future.
For more information about disclosure, check with the Insurance Council of New Zealand, or reach out to your Insurance Adviser.
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