Be honest, sure your insurer will pay a claim

Your broker must play his role, but so must you

The case in which Momentum initially declined to pay Nathan Ganas’s widow his life insurance because he did not disclose he had blood sugar, has highlighted the vital importance of making full disclosure when you apply for cover. The outcry over the fact that Ganas did not die of any blood sugar-related illnesses, but was gunned down at his Durban home in a botched hijacking, saw Momentum create a benefit for violent deaths and pay the widow out.

But the case highlights the fact that insurers can and will deny your claim if you fail to disclosure all the information they ask for because it prevents them from assessing the risks properly.

If you think applying for life or disability cover through a broker protects you if you fail to disclose important information, think again. Nedbank’s Isaac Manicus says in the latest newsletter of the Ombud for Financial Services Providers, there is a misconception that using a broker protects you from misrepresentation or non-disclosure of key information. “It’s essentially a two-way street. The insurer has obligations towards you, and you, in turn have an obligation to make sure the broker and insurer get full and honest representations.”

So, what is your responsibility? Be honest

The cover insurers provide is completely dependent on the disclosures you make, so Manicus says honesty is your best policy.

If the insurer finds out when there is a claim that you were not honest, it can cancel the contract and return the premiums, leaving the claim unpaid. When you claim, an investigation will reveal if you have failed to disclose any information. Question your broker

Ask your broker which information is material to the insurer for your risk assessment. Withhold nothing from your broker, and the broker should also not withhold anything from the insurer. Melani Winkler, assistant Fais ombud, told Money there have been cases where policyholders have disclosed everything, but the broker has failed to disclose the information to the insurer. This is especially prevalent with medical scheme brokers, she says. In these instances, you would be able to turn to the ombud.

Take all underwriting and annual reviews seriously

If changes happen in your life, you are obliged to let your insurer know, Winkler says. “Where there is a change in the risk, like a change in employment, in smoking habits, or the addition of risky hobbies like skydiving, you have to disclose this information.”

If your broker is receiving an advisory fee on an ongoing basis, he or she is required to do annual reviews to ensure the policy and benefits remain relevant to your needs and circumstances. If there have been any changes they can advise your insurer and you if the policy is no longer appropriate.