DOs AND The DONTs: DO Disclose All Required Information
All insurance contracts are governed by a principle called “utmost good faith” It comes from a Latin term ‘uberrimae fidei’. Many who insure do know this term or understand this legal principle. Normal contracts are not governed by such a requirement. For example, when you buy a loaf of bread or a motor car or a house you can inspect it before you buy it. So you know what you are buying.
But in insurance, as a general rule, the insurance company does not see or inspect the car or the house etc that you insure. They also do not see you physically when you take a life policy. So they depend entirely on what YOU tell them about what you insure. This is done through the proposal form you have to fill up. This is the reason for the requirement of utmost good faith on your part.
The concept of utmost good faith applies to all insurance contracts whether it be life, fire, motor or home insurance. Only you know about all the facts about what you are insuring. So you must disclose all information asked. Regrettably, as Ombudsman I was unable to help several people whose claims were rejected because they had not honoured the principle of utmost good faith and were liable for non-disclosure of material facts.
You cannot also say that the insurance company’s Agent told you that certain questions in the proposal form can be left unanswered or blank or that it is all right to give an incorrect answer. The insurance company is not liable if their own Agent has misled you because it is you who insures and takes a policy – not the Agent – and it is you who sign the proposal form. Utmost good faith is expected from YOU and not the Agent.