Legal-Ease by Sheri Yakashiro
When you finally take the step to seek out and apply for life insurance, you are likely doing so for all the right reasons: financial security for your loved ones and the assurance that your family is not left paying the bills after you have gone.
What you may not realize, and sometimes are not told, is that when you apply for life insurance, you must provide full disclosure and must not misrepresent any facts within your knowledge. Any failure to provide your insurer with all “necessary” information could result in the life insurance contract becoming void, even if you misrepresent or conceal a fact unintentionally. What is “necessary” includes anything that may affect your insurer’s decision to insure you.
A life insurance policy is drafted to favour the insurer. Insurers are not obliged to inform applicants about their duty to provide full disclosure. In fact, the insurer is not even required to request all of the information it deems necessary. Regardless, you still have an obligation to disclose this information to the insurer. The insurer is required to look into any “red flags” that arise in your application, but aside from that, the insurer can otherwise rely on the information provided by you as being both accurate and complete.
Since the onus rests on you to disclose everything you know, you should include any symptoms, medical tests or consultations that you may have had, even if the results themselves are not yet known and you do not think they are important. This includes any pre-existing medical conditions, tests, x-rays and other medical encounters.
These obligations also apply during the reinstatement of a life insurance policy. In one case, while being covered under a life insurance policy an insured person was diagnosed with a liver disease. After her diagnosis, she became angry at her insurer and suspended the payment of her premiums. As a result of the lapse in payments, the insured was forced to reinstate her policy. In her reinstatement application, she failed to disclose the liver disease. She later passed away and a claim was made under her policy. The BC Court of Appeal ruled that the policy was void due to the insured’s failure to disclose a material fact in her reinstatement application.
It is important to ensure that your application is correct and complete to the best of your knowledge, since the application form that you sign likely contains a fine print clause stating that you confirm that your statements are all true and complete.
If you are unsure if something is relevant, ask your insurer for clarification and direction. Leaving something off your application because you are afraid your coverage will be denied may ultimately result in you paying premiums for years towards a void policy.
Sheri Yakashiro is an associate lawyer with RDM Lawyers LLP.