Have you ever wanted to know the reasons why is disclosure important when taking out insurance? When a person claims their insurance, it is of utmost importance to disclose the essential details in an insurance contract to claim their insurance without any issues when something happened to them.
The insurance contracts are legally binding, so every client who takes insurance should disclose necessary information to avoid problems when claiming it. Additionally, it is the duty of the insured client, in their knowledge, to disclose any facts and circumstances to the insurance agent.
An insurance policy is a written contract wherein when the insurer encounters certain risks such as accidents, natural disasters, or death, the money they paid for the insurance policy compensates for the expenses needed. However, the insurance policy only covers the circumstances that happened out of control by the individual. Keep on reading as we discuss to you the four reasons for the importance of disclosure in insurance.
Reasons Why Disclosure Is Important In Insurance
Both the insurance agent and client have the duty to disclose the insurance policy so that the agent can assess the client on what is included under their insurance policy coverage.
The disclosure of all relevant information will also ensure the client that the agent’s liability during particular circumstances is not more than expected. With that, here are the four reasons why is disclosure important when taking out insurance.
Reason #1. Proper assessment
It is of particular importance that the insurance is disclosed by both the insurance agent and client to assess the insured individual regarding the policies correctly. This proper assessment allows the agent to discuss with the client the conditions and pricing of the insurance policy, which includes essential information such as age, occupation, medical history, and any financial problems.
So, when the client did not agree to disclose relevant information with the agent, there would be a dispute when the client wants to claim the insurance.
Reason #2. Coverage of the insurance
In disclosing the insurance with the agent, you will understand and learn the insurance policy coverage that you will get. It is essential to disclose the insurance with them because there would be a misinterpretation of the insurance policy when you failed to do so.
For instance, when you did not disclose the relevant information, such as your medical history, the claim you will process later will be considered a fraud. This is because you have not stated the possible risks you may encounter with the insurance agent, particularly in your health condition.
Reason #3. Avoiding misinterpretation
In insurance, misinterpretation usually occurs when the client did not disclose the relevant information needed to the insurance agent. It also happens when the client intentionally provided false information for the sake of disclosure in insurance.
Keeping the details will also cause misinterpretation during the insurance claims, especially when the client decides to change the contract’s terms and conditions or not enter the contract anymore. Furthermore, withholding information will cause the contract invalid when the client only reveals the relevant details they should disclose beforehand.
The agent must update the insured of all material information regarding any changes made by an authority to an insurance contract to prevent other misunderstandings. Informing the client about the changes is essential because in certain circumstances when the policy is modified, there will also be an effect on the insurance premiums, whether it increased or decreased over time. It is also essential for the agent to talk the matter with the client to inform them about the price adjustment to avoid misinterpretation during the claiming stage.
Reason #4. Duty of the insurance agent
As we mentioned in the reasons mentioned earlier, the insurance agent must disclose the relevant information to the client when taking insurance. Their responsibility includes that before entering the insurance contract, every relevant detail known to the client should also be relevant to the client’s decision whether to accept the risk and settle the conditions of the insurance.
However, please note that not all information irrelevant to the risks and circumstances that the client will face should be disclosed to the agent. The details such as the matters diminishing the risk, details deemed of general knowledge for both the agent and client, supposedly known by the agent, and those that the insurer has waived are not necessary to include in the disclosure.
Risks necessary for the disclosure of insurance policy include the property conditions, medical condition, statutory history, and insurance claims history. The client should disclose these risks with the agent to avoid any misinterpretation during the claim. Remember that misinterpretation of insurance policy may result in rejection of the claim or cancellation of the insurance policy.
And those are the four reasons why is disclosure important when taking out insurance. Keep in mind that an individual transacting an insurance policy has to disclose all relevant matters in the contract so the agent can settle the premiums and conditions of the contract. Moreover, disclosing relevant details ensures the client that their liability is no more than expected under normal conditions.