Always, always tell the truth when filling out insurance forms
Small f ibs and omissions on your life cover application can void your policy decades later, so...
Your 48-year-old spouse has just died. You have two children – aged nine and 12 – to look after. Bringing them up on your own will be tough in any circumstances, let alone those in which you now find yourself. Financially, it will be touch and go to survive. But at least you have life insurance to cover your mortgage.
You have paid more than €30 a month for 15 years – over €5,000 in total premiums. But you are in for a shock. The life company refuses to pay out because of an omission on a form filled in 15 years earlier.
This is exactly what happened to a British widower in a high-profile case recently.
But similar rules apply here, financial advisers Orca Financial have warned.
And thousands of Irish people are in danger of losing out on life insurance claims because they don’t answer questions correctly.
Michael Leatherbarrow claimed on life cover after his wife Corinne was found dead at the bottom of a cliff. The inquest found that his wife had been drinking alcohol and gave an open verdict.
But the insurer, Royal London, initially refused to pay out on the claim.
It discovered that she had ticked a box on the insurance form years before stating that she was not suffering from any mental disorders.
But the insurers investigated and found she had suffered in the past from what it claimed were longstanding mental issues, including postnatal depression.
After the case was highlighted in the media, the insurers paid over half of the insured amount.
‘The case describes exactly what might happen here,’ says John Molloy of Orca Financial.
‘The insurance companies really do try to pay out on claims – 80% of the cost is reinsured anyway.
‘They don’t like the bad publicity of not paying out claims, and underwriters can be quite compassionate about the financial impact of a claim.
‘You can only sympathise with the family in those tragic circumstances, but it was a clear case of non-disclosure.
‘If something is a risk, they will look into it.’
If an issue of suicide arises, ‘once the policy is in place for over 13 months, an insurer will pay out’, Mr Molloy says.
‘Unfortunately, as with the story in The Guardian, non-disclosure of previous diagnoses or treatment for depression or mental illness can threaten a payout.’ Over 98% of life cover claims are settled, Mr Molloy said. ‘The one and a half percent that are declined usual involve non-disclosure. ‘On a life cover application form there are 27 or 28 medical questions that are very easy to skip through. If you’re ticking down a long list of “no” answers, it’s easy to tick no automatically when you should tick “yes”.’ That may seem like a simple mistake but it could have critical consequences for your family if you, or they, subsequently make a claim. A proposal is a legal document, and failing to fill it in properly can have serious repercussions. When advising clients, ‘our whole focus is to make sure every questions is to read carefully and answered accurately at the time of filling out the application,’ Mr Molloy says.
He advises people to put all details down on the form, especially healthpositive information. Here’s a quick guide to conditions to watch out for when buying life cover:
HEREDITARY CONDITIONS
Something people often get wrong on insurance forms is answering hereditary conditions.
You will be asked if any parents, brothers or sisters died under the age of 60. ‘People don’t like filling out that part and it tends to be skipped over for some reason,’ says Mr Molloy. Yet even such an inoccuous omission or untruth can lead to a claim being declined.
DEPRESSION
Postnatal depression is a temporary and common condition. In most cases it would be accepted without penalty. So there is little to be gained from nondisclosure.
In more serious or long-running cases of depression, insurance can be declined – or a claim refused.
In the case of Ms Leatherbarrow, the insurer said it became aware of long-standing mental health issues and reduced the payout to her widower.
In the case of mental health issues, there is an increased risk of suicide or accident and this can have an impact on the cost of life insurance cover.
Underwriters look at the facts and the triggers of the person’s depression, like bereavement, divorce, illness, redundancy or job and money worries, the prescribed medication and the state of mind.
A spokesman for Zurich Ireland said the majority of applications that they received for life cover with a history of depression were accepted with no extra loading.
When asked what impact a diagnosis of depression would make to the cost of an insurance policy, he explained: ‘This would depend on the individual assessment of the depression history and can vary on the basis of the type and severity of the depression, date of last symptoms, and other individual circumstances.
‘There is a stipulation in all life insurance policies that specifies that all life insurance policies contain an exclusion for death.
If a life assured dies within a year of the start date as a result of their own deliberate act, we will not pay you any benefit under the policy.’
VERY SERIOUS ILLNESS
Life-threatening issues such as strokes, cancer and heart attacks will lead to an exorbitant quote or cover being declined.
However, if you are old enough you can always get over-50s cover
This isn’t the best value life insurance – unless you have one of those serious conditions.
But in that case it practically guarantees that you will be accepted.
The average amount people are insured for is €5,000 to 7,500, but policies can go up as high as €50,000.
Another form of no-questionsasked life cover is to borrow or save with your credit union. In the event
of untimely death, your loan may be cleared and your savings doubled, depending on the union you are with.
HIGH CHOLESTEROL
If you suffer from high cholesterol but are managing it well, you will not be penalised by your insurer.
However, you should always declare if you have this issue as it can cause a life-threatening condition.
ASTHMA
This can also be well managed and should not affect life insurance premiums.
SMOKING
Whether or not you smoke is a big one that catches out a lot of people. A life cover form asks if you have smoked at all in the last 12 months.
If you have the odd fag down in the pub on Friday nights only, it can be hard to admit that you are a smoker and face a doubling of your cover. But in the event of a claim, insurers will contact your doctor. And if you have ever admitted you smoked, it will be on your medical file.
If the claim is for a smokingrelated illness, which make up 85% of serious conditions, the insurer may only pay out half of the insured amount, according to Mr Molloy. ‘Insurers will ask if you have smoked any tobacco products. There is only one company, New Ireland, that allows vaping, but a 50% penalty applies (it’s 100% for smoking).’
This doesn’t necessarily mean vaping is very bad for you – the jury is still out on that one. Insurers have just taken the view that people who vape are also likely to smoke.
Smokers can still get affordable cover, Mr Molloy says. He gives an example of a couple – Stephan, a smoker and Amelia a non-smoker. Orca came up with a quote for this couple of €33.88 a month for dual Life Insurance for €200,000.
HIGH BLOOD PRESSURE
Lots of people in Ireland suffer with high blood pressure and this can be a contributory factor to death and life-threatening illness. However, it is easily managed these days and should not increase a life insurance policy. But you should always explain details on your proposal form.
For example, if you admit you have visited the doctor recently over high blood pressure, explain that it was only in the moderately high range and this will stand in your favour. ‘It also saves the company going back to the doctor,’ says Mr Molloy.