Be­ware in­sur­ance pre-ex­ist­ing pit­fall

Central Leader - - NEWS -

A man heads off to the Cook Is­lands with his wife, con­fi­dent in the travel in­sur­ance pol­icy he has in his suit­case.

He has a mas­sive heart at­tack and dies.

How­ever the in­surer won’t pay up be­cause the man had a med­i­cal his­tory, in­clud­ing be­ing ad­mit­ted to hos­pi­tal with chest pain and hav­ing been di­ag­nosed with pe­riph­eral vas­cu­lar dis­ease.

In in­sur­ance par­lance the man had a ‘‘pre-ex­ist­ing con­di­tion’’ which was not cov­ered by his pol­icy.

The non-dis­clo­sure of ex­ist­ing con­di­tions, the In­sur­ance Om­buds­man tells me, re­mains one of the big­gest causes of in­sur­ance claims (life, trauma, in­come pro­tec­tion, etc) be­ing turned down and, in­deed, of poli­cies be­ing torn up by in­sur­ers.

And ex­actly what con­sti­tutes a pre-ex­ist­ing con­di­tion is not widely un­der­stood.

In­sur­ers need to know as much about the risks as they can be­fore they of­fer you a con­tract, and in the case of per­sonal in­sur­ance that means you telling them about all the per­ti­nent things in your med­i­cal his­tory.

It’s all the things a pru­dent un­der­writer would con­sider he or she needs to know.

On one level this is per­fectly rea­son­able.

I mean, say I take out a mil­lion dollars of life in­sur­ance and keep to my­self my re­cent di­ag­no­sis of ter­mi­nal can­cer.

You wouldn’t ex­pect the in­surer to pay up, or at the very least, you’d ex­pect me to have to pay a one-off, up-front pre­mium of $1 mil­lion.

But viewed an­other way the ‘‘pru­dent un­der­writer’’ rule is a lit­tle slip­pery.

How do you know what an un­der­writer needs to know?

OK, one can be pretty sure about the can­cer, but what about the shoul­der in­jury you’ve long since re­cov­ered from?

What com­pli­cates things fur­ther is that I can have a symp­tom of a pre-ex­ist­ing con­di­tion which has not been di­ag­nosed and that can be the ba­sis of a claim be­ing turned down.

Even more com­pli­cat­ing is that the word­ing of many in­sur­ance poli­cies when defin­ing what is a pre­ex­ist­ing con­di­tion is ex­tremely wide.

It de­fines a pre-ex­ist­ing con­di­tion as a con­di­tion ei­ther ‘‘di­rectly’’ or ‘‘in­di­rectly’’ re­lated to a con­di­tion that gives rise to a claim. Yep, that’s clear. I see three lessons in the story of my above-men­tioned heart at­tack vic­tim which was a real life ex­am­ple from a re­cent case filed to the om­buds­man.

The first is that great care is needed in ap­ply­ing for in­sur­ance to avoid fall­ing into the non-dis­clo­sure trap.

The sec­ond is that many peo­ple pay­ing pre­mi­ums now are in dan­ger of find­ing their in­sur­ance es­sen­tially worth­less if their in­surer de­cides to go back and check their med­i­cal notes when a claim is made.

Even the in­no­cent nondis­clo­sure of a med­i­cal de­tail the in­surer would have wanted to know about for the pur­poses of de­cid­ing whether to in­sure you or not, can lead to a claims pay­ment be­ing re­fused or re­duced.

If wor­ried about what you have said, the Pri­vacy Act means you can ask your in­surer to let you see your ap­pli­ca­tion, giv­ing you a sec­ond chance to fess up. The third les­son? Never ac­cept the first ‘‘no’’ an in­surer gives you when claim­ing.

In the case above, widow com­plained to In­sur­ance Om­buds­man.

It sought ex­pert med­i­cal ad­vice from a car­di­ol­o­gist which said that on the bal­ance of prob­a­bil­i­ties, the heart at­tack was not even in­di­rectly re­lated to the man’s pe­riph­eral vas­cu­lar dis­ease or a pre­vi­ous hos­pi­tal ad­mis­sion for chest pain.

It wasn’t a pre-ex­ist­ing con­di­tion at all. his the

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