Non-disclosure
Non-disclosure occurs when a policyholder fails to inform the insurer of material information during the application process or when updating their policy, potentially affecting coverage.
Detailed Explanation
Common Misconceptions
- •Non-disclosure doesn't automatically void your policy - the consequences depend on the type of non-disclosure and when it occurred
- •Forgetting to update your insurer about changes during the policy term is different from non-disclosure at application - you should notify insurers of material changes
- •Insurers cannot use non-disclosure as a reason to deny claims for unrelated matters - the non-disclosed information must be relevant to the claim
Real-World Examples
A home insurance applicant didn't mention previous water damage because the insurer's question only asked about fire damage; AFCA found no non-disclosure as the question was too narrow
A life insurance applicant failed to disclose they smoked when directly asked; the insurer reduced the death benefit proportionate to the premium difference between smoker and non-smoker rates
A consumer didn't disclose a speeding fine from 5 years ago when applying for car insurance; the insurer found this wasn't material to the current risk and paid the claim in full
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Related Terms
Explore related insurance concepts
- Duty to Take Reasonable CareThis duty, introduced in 2021, requires consumers to take reasonable care not to make misrepresentations to insurers when applying for insurance or making claims, replacing the previous duty of disclosure.
- Duty of DisclosureThe previous consumer obligation requiring policyholders to disclose all relevant matters to insurers, now largely replaced by the duty to take reasonable care for consumer insurance contracts.
- MisrepresentationMisrepresentation occurs when a policyholder provides false or misleading information to an insurer, whether intentionally or unintentionally, that could influence the insurer's decision on coverage or terms.
- Policy VoidA void policy is treated as if it never existed, typically occurring when an insurer cancels coverage from inception due to fraudulent misrepresentation, reckless non-disclosure, or material breach of policy terms.