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If there’s one tip for hassle-free life insurance, it’s this: be honest. It's no secret that withholding information on your life insurance application can result in claim denials in the future.
Life insurance premiums are primarily determined by your age, medical history, and lifestyle, which means that older people or those with pre-existing health conditions could pay more for their insurance than young, healthy people.
It may be tempting to withhold health information or make false statements because life insurance is priced based on your individual risk factors. However, withholding information on life insurance applications and when you are asked health questions can have serious consequences, such as disqualification from cover or denied claims for your beneficiaries. Insurance companies use a variety of methods to verify information upon claims stage , so it's critical to understand the ramifications of your feedback.
Why it's important to be honest on your life insurance application
While it may appear tempting to remain silent about ailments, if your family files a claim for your death as a result of that ailment your claim may be denied. Years of paid premiums will be wasted and your family will be left without the financial protection of your income to cover basic living expenses, tertiary education, and debt on the family cars and home.
Remember that a life insurer may request a medical examination based on the information you provide to determine the severity of a condition you have. If you mention that you have chest pain, for example, the insurer may request an assessment to determine whether you are at risk of having a heart attack.
If you disclose that you have any medical procedures scheduled within the next few weeks, the company may delay issuing a policy until you receive back your results.
If your medical condition or lifestyle choices are deemed a material risk, the life insurer may offer cover with different terms, for example higher premiums or exclusions for certain conditions. Applications are rejected in a small percentage of cases while many insurance claim denials are based on misrepresentations. So honesty really does pay!
If your cover is declined, you can take out accidental death cover. This means that your family can only claim if your death is accidental - for example a car accident - and not if you die from natural causes like cancer.
Tips to ensure your life insurance claim pays out
It is widely assumed that the person applying for insurance understands their own medical condition better than the insurer. As a result, applicants are legally obliged to disclose all information that may influence the insurer's decision when determining appropriate policy terms and premiums.
Your medical history, current state of health, family history, and lifestyle are all examples of material information. With all of this information at their disposal, the provider can determine the exact risk you pose to the insurance company and what premium you should pay. A life insurance company has the right to refuse to pay a claim and declare your policy void if it is discovered that you were dishonest or failed to disclose important details when applying for cover.
Points to remember:
- If you are unsure whether information is important, disclose it and let the underwriters determine whether it is material.
- It will not benefit you to be dishonest, as this could lead to your policy being declared void and your family receiving no benefits.
- If you are unsure about what you need to tell your insurer, declare more rather than less.
- Think back on major illnesses you might have had or hospital admissions and disclose these, even if they happened a long time ago.
- If you don’t understand a question, ask your broker or call centre agent to explain exactly what the question means.
- Disclosing a medical condition does not mean that you will be denied cover. Your premiums might be loaded, certain exclusions applied or you may be offered accidental death benefit only.
- Remember to notify your insurer if your risk changes, such as changing jobs, starting smoking, or participating in a dangerous sport.
Good to know
- According to the Association for Savings and Investments South Africa (ASISA), life insurers paid 99.3% of all claims against fully underwritten individual life policies in 2020 to a value of R20.6 billion.
- Only 219 claims were declined due to dishonesty, fraud, or contractual exclusions like suicide within the first two years from when the policy was taken out.
Finding the right life cover for you
1Life Insurance is a firm favourite in South Africa with many awards to its name. As SA’s No 1 Direct Life Insurer for 11 years running* we offer affordable and convenient products for every life stage, including discounted combo life and funeral cover policies. You can buy comprehensive cover online and manage your policies via an online policyholder portal or WhatsApp.
*Based on Swiss Re Reports 2010-2021.
Life insurers paid 99.3% of claims against fully underwritten life policies in 2020 (asisa.org.za)
The views and opinions expressed in this article are those of the authors and do not necessarily represent or reflect the views of 1Life Insurance or its employees.
We answer your questions about honesty in life insurance
Can I omit information about past surgeries or illnesses that occurred a long time ago?
When taking out life insurance more is better than less. You could do your family an injustice by not disclosing all of your medical history, no matter how small. Honesty is your best policy when it comes to disclosure upfront.
What happens if I don't understand a question on the life insurance application?
If you are unsure of any question being asked when taking out your life cover, then speak to your financial advisor, do your own research, or speak to a skilled consultant from a reputable insurance company. Buying insurance should not be overwhelming, but rather a simple, easily understandable process that empowers you.
Will being honest about a medical condition automatically lead to a denial of life insurance coverage?
It all depends on the medical condition that is in question. Some insurers may not underwrite you, which means you will not get the life insurance coverage with them, where others might put a loading on the premium (you pay more than others because of the risk), or insurance companies could exclude that medical condition and still offer you cover. When this happens, in the event that you die from that disclosed medical condition, they will not pay your claim, but will if your death is caused by/from something unrelated. One other option is that the insurer offers you an Accidental Death policy only, which will only pay out if you die in an accident. It is important to read your policy schedule when taking out your insurance cover to understand what has been applied to your policy. Generally, it pays to be honest. Disclose all medical conditions so that a valid claim can be paid out to your loved ones hassle-free.