In insurance, honesty is a requirement, not simply a virtue. Your insurance contract’s foundation lies in the proposal form, and your information has to be honest, thorough, and correct. Whether done intentionally or unintentionally, improper filling could have grave results. Wrongful entries in a proposal form for life, health, vehicle, or property insurance might result in claim denials, cancellations, or maybe legal problems. QuoteRadar is here to help you in times of need especially when dealing with challenges of policy cancellation.
This blog highlights the five main repercussions of filling an insurance application form wrongly:
Claim Rejection At Time Of Need:
One of the most terrible outcomes of improperly completing the proposal form is your claim’s rejection. Picture your house catching fire or a major medical crisis arises and your insurer rejects your claim on the grounds that the information on your form was wrong.
Many times, claim rejections are due to:
- A medical issue remained undisclosed on a health insurance application.
- A previous accident was not mentioned in a car insurance form.
- In a life insurance proposal, an applicant concealed their drinking or smoking behavior.
Insurers claim in such situations that they would have either denied coverage or granted the policy under changed conditions if they had been aware of all the facts. Thus, incorrect or incomplete statements could undermine the specific coverage for which you bought insurance.
Cancellation or Termination of Policy:
Insurance company reserves right to cancel or terminate your coverage if they find at any time throughout the policy period that the proposal form was improperly filled. This means your coverage disappears completely—even if no claim has been filed as yet.
Policy cancellation may result from:
- Wrongly reported income or employment
- Wrong date of birth—particularly in life and health insurance policies
- Hidden past insurance coverage or claims
- Incorrect vehicle use category (e.g., claiming that a private car is not used for business purposes)
The insurer might notify you in such situations, then cancellation of the policy, so leaving you ununcovered against subsequent dangers.
Loss of Paid Premium:
Often, when a policy is revoked because of false information on the application form, your paid premium may not be reimbursed—or perhaps only partially refunded. Insurers rationalise this by saying that:
- The policyholder breached the principle of utmost good faith.
- Expenses of administrative and underwriting process were already paid.
- The risk accepted was based on erroneous information.
You not only lose your coverage this means you also forfeit the money you invested in it. If the misstatement is deemed fraudulent, there is no reimbursement whatsoever.
Legal Ramifications and Insurance Fraud Charges:
Insurers can sue under insurance fraud legislation if the false or incorrect information was provided intentionally. Fraud covers:
- Lying regarding preexisting issues
- Claiming another identity
- Falsely creating documents
- Intentionally hiding essential material facts.
Actions like these can have consequences like:
- Criminal charges
- Fines
- Permanent blacklisting by insurance firms
In many areas, insurance fraud is a major crime that could result in court trials and maybe prison. Whether the mistake was deliberate or not, its seriousness will determine whether legal inquiry is initiated.
Future Challenges In Obtaining Insurance:
Once found, wrongful filling of a proposal form could be logged in insurance databases. This might complicate your future insurance coverage. Different insurance companies could:
- Requests greater premiums.
- Refuse to insure you completely.
- Establish harsher conditions or exclusions.
Particularly in life, health, or motor insurance, once you are marked as a high-risk or non-compliant candidate, insurance companies could let you go to lower their exposure. This could impact your financial strategy and security over the long run.
Principle of Utmost Good Faith:
According to the principle of utmost good faith, uberrimae fidei, the proposer and insurer must reveal all the relevant information prior to the policy start. No insurance policy is free from this rule; it applies to every single one. At the moment of purchasing an insurance policy, the customer is responsible to declare all relevant material facts in the proposal form. The material facts are those which determine the insurance company’s willingness to accept the proposal. For instance, in health insurance, any sickness before the start of the policy is classified as a pre-existing condition and must be disclosed on the application form.
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