Your duty to take reasonable care not to make a misrepresentation (and why it matters)

The application process is your chance to get certainty from your insurance. That’s because the information you provide in your application will help the insurer decide what you’re covered for, and on what terms.

When applying for insurance, there is a legal duty to take reasonable care not to make a misrepresentation to the insurer before the contract of insurance is entered into. To meet this duty, each person whose life is to be insured must also take reasonable care not to make such a misrepresentation.

A misrepresentation is a false or misleading answer, an answer that is only partially true, or an answer which does not fairly reflect the truth.

This duty also applies when extending or making changes to existing insurance, and reinstating insurance.

Comply with your duty to take reasonable carenot to make a misrepresentation, and you can generallybe confident your cover will do exactly whatyou expect it to do if you make a claim.

Imagine you bought a second-hand car that came with a dented bumper. When you go to insure it, your insurer will want to know if there’s any existing damage to the car – because they’re not going to pay to fix anything that happened before your cover started. It’s a similar story with life insurance.

When you apply for life insurance, you’re asked to complete a personal statement with a range of questions about your health, pastimes and medical history.

Your completed personal statement is designed to provide the insurer with information to allow them to underwrite the risk of you claiming. The insurer is looking to see if you present a standard risk of claiming or does anything indicate that you have a higher risk including:

• Any pre-existing medical conditions
• Any dangerous pastimes or activities
• Any risky work-related duties

When you make an insurance claim, the claims assessor will review your medical records to ensure you’ve met your duty to take reasonable care not to make a misrepresentation and you’re eligible to receive a claim.

Not meeting your legal duty can have serious impacts on your insurance. Your cover could be avoided (treated as if it never existed), or its terms may be changed. This may also result in a claim being declined or a benefit being reduced.

Whether we can exercise one of these remedies depends on a number of factors, including all of the following:

• whether the person who answered our questions took reasonable care not to make a misrepresentation. This depends on all of the relevant circumstances. This includes how clear and specific our questions were and how clear the information we provided on the duty was
• what we would have done if the duty had been met – for example, whether we would have offered cover, and if so, on what terms
• whether the misrepresentation was fraudulent
• in some cases, how long it has been since the cover started.

Just because you don’t disclose something or you have made a misrepresentation, that doesn’t mean your claim will automatically be declined.

If your non-disclosure or misrepresentation isn’t related to your claim, and the insurer would’ve still covered you on the same terms if they knew that information, there may be no impact on the claim at all.

There’s a big difference between innocently forgetting to tell your insurer about a medical condition and deliberately leaving something out you know will be relevant to your cover.

When assessing non-disclosure, an insurer will review each case on its merits to establish what is fair and reasonable – taking into account how the non-disclosure came about.

Insurers don’t decline claims lightly.

Your duty to take reasonable care not to make a misrepresentation also applies when extending or making changes to existing insurance, and reinstating insurance.

* Insurers can change premium rates but you cannot be singled out for rate change.