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Full disclosure on life insurance application

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In a recent case in the U.K, a cancer victim’s family was denied their life insurance payout due to failure to disclose.

While he died from cancer, it turns out that he failed to disclose two items during his application. The first was that he had ‘pins and needles’, and the second was that his doctor had advised him to reduce his drinking.

Could this happen in Canada? Absolutely. Failure to disclose information during the application can – and likely will – result in the claim being denied. Here’s a few notes from the story:

Nic’s consultant oncologist Dr Rubin Soomal, from The Ipswich Hospital, said neither alcohol, nor pins and needles were linked to his death,,,, have refused to pay out on a technicality which has nothing to do with the disease that tragically took his life.

The point?  The problem that was not disclosed does not have to be related to how you died.

But medical records show he drank just 10 to 20 units of alcohol a week – below the NHS recommended weekly allowance of 21 units.

The point?  It doesn’t matter if the insured or their beneficiary believe the item to be minor. 
‘They have shown very little sensitivity to the family’s situation and have refused to pay out on a technicality which has nothing to do with the disease that tragically took his life.
The point?  Social pressure will not convince a company to pay a death claim when full disclosure was not provided at time of application. 
When you purchase a life insurance policy from a life insurance company, your policy is a contract.  It’s not a gentleman’s agreement – is all written out very specifically.  Here’s the wording from my life insurance policy:
In the absence of fraud, this policy and any insurance coverage under this policy applicable to a Primary Life Insurance will be incontestible after this policy has been inforce during such primary insured’s lifetime for two years from the later of the Effective Date and the date of the latest reinstatement or change.
So it’s saying the policy is not contestible after two years unless for fraud.  But let me reverse that.  It’s also saying that the policy IS contestible in the first two years for ANY reason, and after two years it’s contestible for fraud.
So there’s two ways to deny your claim.  In the first two years they can contest for failure to disclose, and after two years for the technical (not consumer understood) definition of fraud. It’s in the contract in black and white, and you’re paying the premiums on it.
To be clear, I’m not justifying the insurance companies behavior.  It’s tragic for a family to not receive death benefits.  What I am suggesting is that you fully disclose everything (even if you think it’s not important or relevant) during your insurance application. Failure to do so can result in the insurance company denying the claim.  Protesting that the information that wasn’t disclosed is irrelevant to the manner of death, protesting that the information that wasn’t disclosed was minor, and even social pressure will not change the fact that the insurance company will stick to the policy as agreed, and deny the claim.

Wrongful or criminal deception intended to result in financial or personal gain.


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