What to do if you forgot to include important info while buying insurance

Did you miss some relevant information in your insurance application (life/health/accident etc.)? Then this is what you need to do

Published: April 9, 2020 at 10:54 am

Many insurance buyers “forget” to include relevant information in the application form. Sometimes this is accidental, and sometimes this is deliberate (either on their own or on the “advice” of the agent). This violates the insurance contract making the policy and all the premiums paid useless. If you have failed to disclose any relevant information, this is what you need to right away.

About the author: Deepak Mendiratta, managing director of plancover. Deepak has helped many families get medical cover and has also favourably resolved complicated claims. His competence is regularly on display at FB group Asan Ideas for Wealth (AIFW). Regular reader may recall his webinar: How to select a health insurance policy in 2020

Insurance is a contract entered into on Utmost Good Faith. Not including relevant information in the proposal form at the time of taking the cover include – Non-declaration, Mis-declaration or partial declaration – is considered as a breach of the basis of that contract. This has an implication of cancellation of policy and non-payment of claim in future.
Common Reasons for missing on disclosures include 
  1. Intentionally not wanting to declare with consideration of hiding the facts 
  2. Not being aware of what to declare and what not to 
  3. The proposal form is filled by someone else especially an agent
There is a high tendency to buy insurance in case of the presence or suspected presence of an ailment. Insurers often hedge this risk by having a deferred benefit payment – in health, they have a waiting period for the first 30 days and certain treatments for the first year or two. This apart, pre-existing is not covered for a longer duration of time. In life insurance, suicide is not covered for Year 1 
In health insurance, pre-existing conditions and diseases have an important role to play in the issuance of the policy. The practice followed commonly has allowed the insurance companies to not only deny claim payment but also cancel the policy for non-disclosure of material facts. 
In life insurance, non-declaration has far greater implications as compared to non-life products like health. This due to the trigger being death and the stakes being higher in payouts often. While Section 45 of Insurance Act, 1938 deals with time barring on such information being discovered by the insurer post-policy sale, it is advisable for policyholders to note the implications of such a discovery. While most material facts are asked in the proposal form, one may miss declaring accurately or may be advised to declare contrary to facts. 
Once you find that the proposal form may not contain all information accurately, I personally am of the opinion, that you should proactively approach the insurer and update them of the same. 
The options are then with the underwriter to evaluate if the declaration has a material bearing on the risk or not. They may be depending on the nature of declaration, allow the policy to continue, especially if it is a minor impact on the overall risk assessment – viz a severe accident many years earlier that you missed mentioning or an equally severe infection resulting in hospitalization.
In case its an important risk-bearing information viz whether you are a tobacco consumer, the insurer may advise cancellation of the policy and request you to go in for issuance of a new cover. In either case, it is advisable that you f0llow those guidelines given to make sure that in the event of a claim in future, this does not become a roadblock to having the settlement in your favour. 
Do also read the fine print in the policy on informing the insurer in case of a change of habits. If such a clause exists in your policy, do inform the insurer. They may end up putting a premium loading but will not be cancelling the cover. 
In case you suspect yourself of not having disclosed fully, I advise that you come clean now rather than continuing payment premiums which may keep open the risk of non-payment of claims in future.
Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps