In the course of completing a life insurance application an individual will be required to provide specific information about the state of their health and their lifestyle habits, and will be required to ask a number of questions about their medical history. It is a legal requirement that all of these questions and disclosures – the material facts in calculating the policy premium – be provided truthfully.
This concept is known as Utmost Good Faith.
Under the principal of utmost good faith you cannot be required to disclose what you do not know. Some medical conditions, for example, may be readily diagnosed by a medical professional while a layman could not possibly recognize the symptoms.
In this instance the layman would not be penalized for failing to disclose a medical condition he did not know about.
Should the policy applicant breach the principal of utmost good faith then the policy is typically rendered void.
However, once a policy has been in force for a specific period of time it cannot be voided – this is known as an Incontestability Period.
Consequently it is important that any non-disclosures be discovered as soon as possible by the insurance company.
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