Applying for Insurance? Ask Questions and Take your Time

Applying for Insurance? Ask Questions and Take your Time

Author: Kris Bonn

We live in a society where insurance is ubiquitous, we must have insurance if we drive a car, if we own a home, we almost always have home insurance, we buy life insurance and long-term disability insurance to protect our families and, if we travel, we buy travel insurance. We buy insurance to protect us when bad things happen.

Unfortunately, often when we need the insurance, claims are denied because the insurance company does a post-event investigation and takes the position that the insured failed to disclose or misrepresented facts on the insurance application. This comes as a total shock to the person who was counting on that insurance coverage. In many cases, the insurer is correct and the insurance company can avoid paying out the claim. Even if the person made an innocent mistake on the application for insurance, if the mistake was material, the insurer will be legally permitted to refuse to pay the insurance claim.

To protect yourself, when you fill out an application for insurance, whether it is for long-term disability, life insurance, health insurance, mortgage or travel insurance, make sure you understand the questions that are on the application and ask many questions of the agent or broker who is selling you the insurance. For example, in Pereira v. Hamilton Township Farmers’ Mutual Fire Insurance Co., 2006 CarswellOnt 2279, the Ontario Court of Appeal overturned a jury verdict and sent the case back for a new trial ruling that the trial judge confused the jury by leaving the jury with the impression that some element of dishonesty or intention to mislead was required before a misrepresentation would be established. The Court of Appeal held that this is wrong in law. No element of fraud or deceit needs to be shown – an innocent misrepresentation by the insured when completing the insurance application is sufficient, if material, to void the policy of insurance.

For anyone applying for insurance, it is critically important to be scrupulously transparent on the application. If you don’t understand a term or question in the application, ask the agent or broker who is arranging the insurance for you. This is particularly problematic when filling out insurance online or over the telephone. Too often these questions are answered in a casual manner and once the insurance is issued, people think they are covered. Only to learn after making a claim that there was an innocent misrepresentation on the application that voids the insurance. For lawyer assisting people on a claim that has been denied for an alleged misrepresentation on the application, the lawyer must question the insurance agent on what the person told the applicant about how to complete the insurance application. Ask the agent or broker if they explained to the insured the dire consequences of not answering questions completely and accurately. I will provide another example that is often used by insurers to deny claims for misrepresentation on an application for insurance. On most insurance applications for travel or life insurance there is a question about whether the applicant has had any diagnostic tests in the last five years. This can include a blood pressure test, a dentist x-ray, a mammogram etc. If the applicant answers no, as many do, this could result in the insurance claim being denied.

As an applicant, take your time when completing insurance applications and ask the agent questions about how to correctly answer all questions on the application. This may result in being denied the insurance or having to pay a higher premium, but in the long run, it is better to know ahead of time that you will be covered and not be surprised later on when you make a claim that you are not covered.

If you have any questions about insurance or have had your insurance claim denied, call us to discuss your case. We can help you sort out these issues and advise if, in the circumstances, the broker or agent who sold you the insurance could be liable for negligently advising you when completing the application for insurance.