What you need to know about duty to take reasonable care
Facts about your health disclosures when applying for personal insurance
You know life insurance is important; but did you also realise how important it is to understand your duty to take reasonable care? Don't let ignorance be the downfall of a perfectly good policy! Let's take a look at what you need to make sure everything goes smoothly when sorting out life insurance in Australia: no last-minute surprises here folks!
Spilling the beans upfront: What is the duty to take reasonable care?
Insurers are now obligated to do more due diligence by collecting information they need, so applicants won't have the guessing game of what information they need to provide.
When applying for insurance, there is a legal duty to take reasonable care not to make a misrepresentation to the insurer before the contract of insurance is entered into. To meet this duty, each policyholder must also take reasonable care not to make such a misrepresentation.
A misrepresentation is a false answer, an answer that is only partially true, or an answer which does not fairly reflect the truth.
This duty also applies when extending or making changes to existing insurance, and reinstating insurance.
Source: https://advisers.zurich.com.au/
It all boils down to providing all accurate information about yourself—think health, lifestyle choices, and anything else that might impact your cover. Without full details on the table, there could potentially mean denial or cancellation. So make sure all your ducks are in a row so you can tick this off with confidence.
Without all the nitty-gritty details, insurers wouldn't be able to decide if they're ready to commit and provide cover. Plus, it’s a legal requirement in Australia, and it applies to all life insurance policies. By sharing enough info with your adviser and insurer, they can make sure everything's legit and that you're getting the optimal deal.
The nitty-gritty of disclosure: What you need to tell your insurer
Make sure you give yourself the best chance at getting great cover by being open about all of the relevant information that needs to be disclosed:
Pre-existing medical conditions, such as high blood pressure, diabetes, or cancer
Physical injuries, previous surgeries, or reasons you've seen a medical practitioner
Medications that you're currently taking
Risky hobbies or activities, such as skydiving or rock climbing
Any other health-related information or lifestyle choices that could affect your risk profile.
Consequences of non-disclosure: What happens when you don't come clean on your life insurance application
An article by TAL summarizes what an insurer can do if the duty is not met:
“If you or the Life Insured do not take reasonable care not to make a misrepresentation, there are different remedies that may be available to us. These are set out in the Insurance Contracts Act 1984 (Cth). These are intended to put us in the position we would have been in if the duty had been met.
For example we may:
void the cover (treat it as if it never existed);
vary the amount of the cover; or
vary the terms of the cover.
Whether we can exercise one of these remedies depends on a number of factors, including:
whether you or the Life Insured took reasonable care not to make a misrepresentation. This depends on all of the relevant circumstances;
what we would have done if the duty had been met – for example, whether we would have offered cover, and if so, on what terms
whether the misrepresentation was fraudulent; and
in some cases, how long it has been since the cover started.
Before we exercise any of these remedies, we will explain our reasons, how to respond and provide further information, and what you can do if you disagree.”
Read full article source here: https://www.tal.com.au/duty-to-take-reasonable-care
At the end of the day, failing to disclose something on your application could leave you in a lurch. If you're not candid and frank when lodging a claim, there's a considerable chance it won't be successful. So if there's something important you think the insurer should know, don't keep them in the dark—or else your pocket might be hit with that dreaded "denied" stamp! Without proper cover for what could happen, it can be hard to make ends meet—so keep all that info up-to-date and let's try our best not to get left high and dry!
Another consequence of non-disclosure is that your policy can be cancelled or void. This can be especially devastating if you're counting on the cover to provide for your family in case something happens to you. Thankfully most insurers will let you know if any relevant information has been missed so that unexpected effects like policy cancellation can be avoided. There really is no substitute for getting all the facts right!
Getting in the details of your applications is awesome, but make sure to review them carefully. We suggest saving a copy for yourself so it can serve as an extra reminder of what went down—just don't forget 'true facts only' or there could also be some repercussions on the cards.
Reality check: How non-disclosure plays out in life insurance cases
John is a 45-year-old bloke looking to protect his family, so he filled out an application for life insurance. He answered all the questions honestly—well almost honestly! John doesn't think it's a big deal that he has high blood pressure and decided not to mention it on the form.
Two months later, John had a stroke during an accident and passes away. His family files a claim for his life insurance policy only to be denied due to one tiny omission. The harsh truth—John didn't tell the insurer about how high his blood pressure was during the application process.
This can sound like a bit of a nightmare, but looking at case studies makes it all easier to digest! Peep some real-life scenarios out there... you never know when they may come in handy!
To avoid such a scenario, make sure all relevant details about yourself (no matter how small) get disclosed before signing on the dotted line—otherwise, any little fibs may mean policies aren’t as ironclad as intended!
Grab your suitcase and get ready to roll and take on the world!
But no matter where you decide to go, at some point everyone needs a little help. If you've got any questions about disclosure during your application process, we're here and ready to help get it sorted out. Chat with us so that nothing stands in the way of your adventures.