It happens – you hear stories of people paying health, income protection or life insurance premiums for years. Then they have a serious accident or get sick and lodge a claim, only to find their insurance company won’t pay out.

Why does this happen?

Let’s be clear – insurance companies don’t decide they won’t pay a claim for no good reason.

If an insurer decides not to pay out, it’s usually because the person insured didn’t disclose a material fact, or every detail of their health or criminal history when they applied for the insurance in the first place. This is called non-disclosure – it’s a big issue and can cause a lot of heartache.

Why is full disclosure so important?

Insurance companies use the information you provide in the application to assess whether they’ll cover you or not.

What you disclose will influence how much your premiums will be and whether there needs to be a stand down period.

For example, if you have a history of depression but it’s well managed and doesn’t adversely affect your life – your insurer may decide not to cover you for a few years for that particular condition – until they’re satisfied it’s not a problem.

If you forget to disclose a medical condition or criminal conviction and make a claim, it’s highly likely your insurer won’t pay out.

Disclosing all material personal information is your responsibility.

How to make sure your insurance provider has all the information they need

When it comes to life, health and income protection insurance, it’s so important to tell your insurer absolutely everything about your past and current medical conditions, occupations and past-times.

If you have any doubts about your medical background – ask your GP to send your medical files to the insurer. It doesn’t cost a cent and could mean the difference between receiving or being denied a claim.

Don’t hold information back because you think it’ll affect your premiums – if it’s on record somewhere your insurance company will find out.

Also remember the insurance companies aren’t the police, so if you have used illegal substances in the past – disclose it!

Tread carefully when changing policies

Disclosure is particularly important if you’re considering changing insurance policies for health or life cover.

If you want to change these policies, you need to make sure you disclose any new medical issues that arose while you were under your previous plan, to your new provider.

If you do decide to change policies and insurance providers – I highly recommend getting a broker involved – they can help you through the disclosure minefield.

Final word

When it comes to insurance what you do or don’t disclose will determine what you’re covered for – or if you’re covered at all.

Full disclosure is your responsibility. When it comes to completing insurance applications or changing policies – talk to your broker or insurance provider if you have any doubts about the information you need to provide.

Michael Broadbent is a Life Insurance specialist. An experienced broker, his business Broadbent Insurance, has helped over 6000 Kiwis prepare for the future. As a member of the exclusive Million Dollar Round Table - he's recognised as a broker that operates to the highest standards of ethics, knowledge and service.