Is your life insurance watertight?

Nobody likes to think about death, which is why life insurance forms are often filled in as a formality and forgotten about. However, although you probably won’t be thinking about your policy on a day-to-day basis, at the back of your mind you will be rest assured that your family will have adequate financial protection in the event of your death – or will they? Any payout will depend on the data and medical information put on your application form, and although you may believe you have filled it out correctly, will it be enough to guarantee your insurance company pays up?“There are two main reasons for life insurance claims being turned down,” says Jonathon French, a spokesperson for the Association of British Insurers, which represents more than 400 insurance companies. “The first is when an applicant fails to meet the terms of the policy, but this is more applicable to income protection and critical illness cover; the second is when somebody fails to disclose medical conditions when filling out the application form. “The standard rule of thumb is to disclose everything that’s relevant,” continues Jonathon. “If the applicant is in any doubt about what they should disclose they should seek advice from their insurance company.” However, it’s not always that simple… Nicky Pope has worked as a journalist in the hairdressing industry for 11 years. She never dreamt she would find herself the victim of an insurance company that refused to pay out. “Just 18 months ago, my world fell apart when my husband Jess suddenly died one Saturday afternoon. He died of a massive heart attack aged 45. He hadn’t been ill, there had been no warning and no history to be concerned about,” she says. “I was totally devastated, but in the days that followed I found some reassurance in the knowledge that at least our finances were pretty secure. "Jess and I had revised our joint life insurance only the year before when moving into a bigger house. The policy would pay off the mortgage and I could then manage financially on my income alone. “However, the real nightmare was just beginning. The life insurance company wrote that, because of the claim arising ‘early’ in the lifetime of the policy it would need to ‘ensure that all the information supplied at proposal stage was correct’. "It requested Jess’s medical records and examined them at length. It was odd because we’d been asked our permission for this to happen when we had submitted our forms, yet despite giving it, no medical checks or doctor’s report had been requested at that point. “Only now, at the time of making my claim and after a year of collecting premiums, did the company seek to check it was happy with the way we’d answered our health questionnaire.” “In the weeks following the funeral, my insurance company used the medical records to present reason after reason why it shouldn’t pay my claim. "Each time, I was able to show why it was mistaken, but it wouldn’t let up. Eventually, my solicitor was told that the life insurance would not be paid on the grounds of reckless or deliberate non-disclosure of material medical information, and referred to two episodes in Jess’s history. "Neither event relates to what he died of. Neither was significant to his life expectancy or ongoing state of health. We hadn't failed to disclose any information we were asked for. “The insurance company's queries arise from the use of vocabulary. The words a GP or hospital uses to record a visit, an illness or the treatment you received, may not be the same as those that you would use. "There could be a difference, for example, between the use of ‘dizziness’ and ‘giddiness’, ‘numbness’ and ‘tingling’, ‘low mood’ and ‘depression’. That difference can prove extremely important. “I am taking the insurance company to court to try and get my insurance paid, but it is an extremely painful experience. “When you buy life insurance, you're warned to fill out the forms honestly and accurately, or payment may be withheld. Fair enough. But you are not warned to check for yourself the contents of your medical records and ensure you follow their wording. "You are not warned that even though life insurance cover appears to be in place, and you’re paying monthly premiums, the insurance company may not have checked it is satisfied with your application. "We believed we had life cover, but had a different procedure been followed, we’d have known it was worthless.”