By John Grant
Times are pretty tough for many familities, and unfortunately this is taking its toll with a growing number of repossessions and mortgagee sales.
If you are one of those impacted by these harder times, then you may need to disclose this to the insurance company.
Why is that, and what do you need to do? Insurance policies are Contracts, and they have a requirement for you to disclose information.
Here is an example of this in a Tower policy;
“The correctness of all statements made in relation to this policy and any claim under this policy is essential before we have any liability under this policy. We must receive all relevant information. This means that you must tell us everything you know, or could reasonably be expected to know, that may influence our decision to insure you or pay your claim. If any circumstances change or may change during the time we provide your insurance you must tell us. Examples of a change in circumstances or any other information may include: • if the use or occupation of the house or land at the situation changes to include any business use; • if any structural alteration or addition is made to your house; • if you are charged with, convicted of or commit any criminal offence, other than traffic offences. These examples are a guide only. If you are in any doubt, you should disclose information whether or not we have asked questions that relate to it. If we are not told we have the option to decline any claim, or avoid this policy from the date of the change.”
Insurance is governed by the doctrine of utmost good faith. What does this mean?
The Insurance Council of New Zealand explain it as;
An insurance policy is a contract of 'utmost good faith' between the insurer and the customer. The insurer is required to observe and honour the contract conditions. The customer is required to disclose to the insurer all material facts that could affect the risk.
For example, a person who travels overseas and leaves their house empty needs to tell their insurer, as an empty house is more risky to insure than an occupied one. Failure to tell your insurance company everything they need to know to assess your risk accurately may jeopardise your insurance cover. If in doubt about what you need to declare, ask your insurance company. A rule of thumb is that you should declare any information that would make the insurer alter the terms and conditions of your contract.
On the question of when you need to tell them, the most likely time to do so is when you have failed in making a payment that could place you at risk of a forced sale occurring.
However the best advice is to do it as early as possible to avoid any potential problems developing.
What could your insurer then do about this?
It will probably have no impact and will be noted on the file. However it could also depend on your track record with the company, if you have had a series of claims and they consider you to be a poor risk then this could be the catalyst for the insurer to withdraw cover.
This would be unsual however, especially if you had been proactive in telling them of your issues. However, the downside of not advising them is that it could be seen as a breach of the ‘utmost good faith’ requirement and could be the basis of declining a claim.
Transparency is the best policy, and the best way to protect yourself when you are under stress.