Insurance

Where can you buy an insurance policy from?

You can buy an insurance policy:-

• direct from the insurer
• through an insurance agent. An insurance agent is usually employed by one insurance company
• through an insurance broker/independent intermediary. An insurance broker/independent intermediary is not employed by or tied to, any one particular insurer. The inurance broker receives commission from an insurer for each insurance policy they sell.
• through another intermediary, such as a building society, bank, solicitor, mail order agent, travel agent, removal firm or accountant.

What you must tell the insurance provider

You must give truthful answers to the questions on the proposal form and disclose information about anything that may affect the insurance risk. If your circumstances change after the policy has been taken out, you may have to tell the insurance provider.

The Insurance Proposal Form

When you wish to take out an insurance policy you will usually have to complete a proposal form. This may be done face-to-face, by post, over the phone or on the internet. All the questions on a proposal form must be answered fully and honestly because the answers form the basis on which the insurer decides whether or not to accept the risk and issue an insurance policy.

A proposal form may include a clause giving the insurer permission to check databases such as the Claims and Underwriting Exchange (CUE) database which contains a record of insurance claims. You do not have to accept the clause but is unlikely you will be given insurance cover if you refuses to do so. You have a right to see any information held about you on the database under the Data Protection Act.

The answers that you give to questions on a proposal form are the basis of the contract. If any of the answers are untrue at the time they were given, the insurer has the option of making the contract void and not paying out on a claim. This can be the case even if a subsequent loss is unconnected to the incorrect answer given.

If you believe that the answer you have given is true, but it later turns out not to be true, this will not make the policy void as long as you gave your answer to the best of her/his knowledge and belief and you took reasonable steps to ensure its accuracy.

You are commonly asked on the proposal form whether they have been refused insurance in the past. You should declare any past refusals, however long ago they were. If the you do not not declare past refusals, the insurer may rely on the non-disclosure to avoid the policy and turn down a claim. However, the insurer may ignore this, particularly if the refusal was a long time ago and on an unrelated matter.

If you are purchasing a insurance policy through an insurance agent, and the agent fails to pass on to the insurance company any information that you have given to them, the insurance company could not refuse to pay out a claim on that basis. This is because any information that the you give to the agent has the same status as if the you have given it directly to the insurance company. If you purchased the insurance policy from an intermediary, for example, a bank or building society which failed to pass information to the insurance company, the company may also have to pay out the claim as the intermediary is likely to be working as the company's agent. An insurance broker/independent intermediary acts as the agent for the client, not the insurance company when undertaking this activity. If you have given information to the broker/independent intermediary and the broker/independent intermediary has failed to pass this information on to the insurer, the insurer may rely on the non-disclosure and refuse to pay out on the claim. However, you may be able to take action against the broker/independent intermediary.

You may have answered all the questions on a proposal form honestly and still find that your claim is refused because you did not tell the insurance provider of a fact which would have affected the decision of the insurer to issue a policy. This is known as failure to disclose a material fact.

Signing the Insurance Proposal Form

When you answer the questions on a proposal form, you will usually have to sign to say that you have told the truth. This may be qualified by words such as 'to the best of my knowledge and belief'. There may also be a statement that nothing has been left out, misrepresented or withheld that may be material. If you take out the policy over the phone or on the internet, you may be sent a completed proposal form or statement of facts document to check and sign.

The proposal forms the basis of the binding contract, so the you should check all the information in it before agreeing that it is correct. This is especially important to do if a broker or agent has filled it in on your behalf or the transaction was made over the phone or on the internet. When a proposer makes a correction to disclosed information, the insurer should issue a corrected statement of facts and where appropriate, an amended policy schedule. You should ensure that corrected documents are received and kept safely.

Change of Circumstances after the Insurance Policy has been taken out

If there is a change to your insurance requirements, you will need to alter your policy, for example, if you move house, if the value of your home contents change, if you changes your car usage to include business use or changes who can drive the your vehicle. You must notify the insurer of the change and get confirmation of the cover. This must be done before the change to your requirements actually happens to ensure that you have the correct cover when the change takes place.

If there is a change to certain material facts, for example, you have a pending prosecution, the client may not have a duty to disclose this fact until the policy is up for renewal or when an alteration is made to it. Some policies do impose an immediate duty of disclosure of such changes, so you should always check your own policy. Changes to factors on which the operation or scope of the policy are dependent should be reported to the insurer immediately. For example, a broken burglar alarm must be reported if the home contents insurance is based on the property have a properly working alarm.

Life policies and other long-term policies and change of circumstances

Life policies and other long-term policies, for example, critical illness, income protection and long-term care insurance are not usually one year contracts like, for example, motor vehicle insurance. A life policy or long-term policy is taken out and is in force for a fixed number of years or until the death occurs. If there is a change of circumstance after you have taken out a life or long-term policy, for example, you develop a serious illness, there is generally no duty to inform the insurer of this change as the policy was given on the basis of your health at the time the proposal form was completed. Some policies will require changes of circumstances to be reported, for example, a change of job should be reported to income protection insurers as this could affect the risk it is underwriting. You should always check your policy to see what information should be provided to insurers.

If you take up a potentially dangerous hobby, for example, rock climbing, this change does not have to be reported to the insurer. However, you should check that your insurance policy does not exclude the activity. As long as there was no intention to take up the hobby at the time the policy was taken out, this will not affect the policy.