If you are applying for insurance in Australia, you have a legal responsibility to tell the insurer everything you know – or could reasonably be expected to know – that is relevant to their decision to insure you and on what terms. This is called the duty of disclosure, and it applies to general insurance products such as home, contents, car, travel and landlord insurance.
The duty of disclosure forms part of the Insurance Contracts Act 1984. It applies when you first take out a policy, when you renew it, and when you vary or extend your cover. It does not end after you sign the proposal form – right up until the policy is issued you must tell the insurer about any change in the information you have given.
So what do you need to disclose? Broadly, anything that a reasonable person in your circumstances would know is relevant to the insurer’s decision about the risk. That might include:
* past claims or losses
* criminal convictions
* a history of insurance cancellations or refusals
* pre-existing damage to the property you want to insure
* modifications to a vehicle
* the way your home is constructed or occupied
You do not need to guess what an insurer wants to know. The insurer will usually ask specific questions. You must answer every question honestly and completely. If you are unsure whether something is relevant, it is safer to disclose it.
What happens if you don’t disclose something?
The consequences depend on whether your failure to disclose was innocent or fraudulent.
* If the failure was innocent or accidental, the insurer may reduce the amount of a claim by the amount it would have increased the premium had you disclosed the information. In some cases the insurer may be entitled to cancel the policy.
* If the failure was fraudulent – that is, you deliberately withheld information or made a false statement to get a cheaper premium or to get cover you would not otherwise have obtained – the insurer can refuse to pay a claim entirely and may cancel the policy from the beginning.
A fraud finding is serious. It can make it very hard to get insurance in the future, and in some circumstances the matter may be referred to law enforcement.
It is also worth knowing that if you realise you have made a mistake or left something out, you should contact your insurer or your broker immediately. Correcting a non-disclosure before a claim arises can help protect your cover.
Because every insurer’s underwriting criteria and claims handling processes differ, the outcome will always depend on the policy you hold and the facts of your situation. That is why it is important to read the Product Disclosure Statement (PDS) carefully and ask questions before you commit.
If you are comparing general insurance options through InsurerHub, you can use the information and tools on the site to understand the types of cover available, but we don’t sell insurance or decide what premium you will pay. We provide general insurance education and may accept enquiries, but we are not an insurer or underwriter. Any product terms you see are indicative only; the final terms are set out in each provider’s own PDS. We will respond to your enquiry within one business day, but we can never promise a particular premium, level of cover, or that a claim will be paid.
Taking a few extra minutes to get your disclosure right can mean the difference between a paid claim and a financial shock when you need cover the most.