When will your insurance not pay out?

The goal of having insurance is to have it work for you when you need it.  Unfortunately, sometimes insurance companies don't pay out on a claim on insurance, and this can give the insurance industry a bad name.  As your financial adviser, we work with you to make sure that you declare everything that you are aware of to an insurer when you are completing an insurance application.

The most common reasons that insurance policies don't pay out when you go to claim are:

  1. Non-disclosure.  This is generally when you have not declared a relevant piece of information to the insurer that would have changed their 'offer' of insurance to you.  It could be headaches that you received medical advice on, or it could be speeding or drink/driving offences when you apply for car insurance.  This is where working with a specialist insurance adviser should protect you from non disclosure.  We encourage our clients to mention everything, no matter how trivial it seems to you.
  2. Suicide.  In many countries insurers never pay out life insurance if the cause of death was suicide.  However, in New Zealand, suicide is covered after a policy is in place for 13 months.  When you move your life insurance company to another insurer, if they have 'transfer terms', you should not have to start your 13 month time period again.  However, it is important that the insurer knows that you are moving your policy to them under 'transfer terms'.  Stuff recently published an article about the impact of suicide on life insurance claims, which you can read below.
  3.  Condition not covered by policy. Trauma insurance policies work extremely well for our clients and make lump sum payments when our clients are diagnosed with a specified condition.  Our clients have had a number of payments for cancer, heart issues, motor neurone disease and other conditions.  However, we have also had one client turned down (about 17 years ago) for a traumatic condition that left her on life support, but it wasn't covered by that policy.  Policy wordings continually change and it is vital that you have a 'policy wording passback' clause in your trauma insurance policy now.
  4. Stand down period. When you take out a new trauma insurance or health insurance policy there is often a stand down period before you can claim (so that you can't take out a policy knowing or in anticipation that you will have a claim in the near future.).  Depending on the policy, this stand down period can be 3 months -6 months.  Around 18 years ago, we had a client who was diagnosed with cancer exactly 3 months after she put in place the trauma insurance.  The stand down period was 3 months.  The insurer, AXA paid the claim.  The insurer that we use for most of our new insurance policies (Partners Life) has a philosophy that 'if it is grey we pay.'  It is important to understand what these stand down periods are.
    Life insurance claims can be turned down in event of suicide

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