Trap 20. ‘There’s No Harm Hiding Details When Buying A Health Plan’

Insurance is all about risk coverage, so the insurance company will always analyse the risk involved before issuing a policy. These risks could be influenced by factors as varying as health conditions, including diseases and treatments, lifestyle habits, or even your job profile and working conditions.

The more risk an individual faces, the higher will be the premium in most cases. For instance, a 25-year-old individual, who has no disease or habits, such as drinking or smoking, and who has a desk job, will likely have a lower insurance premium compared to someone working in a hazardous job, such as mining, oil rig or combat zone. That’s because the risk to life is greater in the second scenario.

Likewise, two individuals with similar jobs, but belonging to different age groups will have varying premiums, because an older person will have greater health risk, some of which could even involve expensive treatments and medical procedures, including surgery and prolonged medication.

Some distributors might persuade you to hide certain facts to ensure lower premiums, which becomes a selling point for them. It is in the interest of distributors to convince you to buy a policy, as they get fat commissions, especially in the case of life insurance.

Hiding facts may prove costly in the long run. In a number of cases of claim rejections, especially in health insurance, the reason insurance companies cite is incomplete information or non-disclosure of key facts, such as pre-existing illnesses or other factors at the time of signing of the contract.

Says Aayush Dubey, co-founder and head-research, Beshak.org: “If the insurance company discovers hidden information during the underwriting process, it may reject the application outright. Alternatively, they might agree to provide coverage, but at a significantly higher premium to compensate for the increased risk.”

Such claims could be denied even decades after buying the policy. Adds Dubey: “If an insurance company discovers that material information was hidden, even a decade or more after the policy was purchased, they may deny the claim based on fraud. This could leave the policyholder and/or their family without the financial protection that the policy was supposed to provide, even after many years of paying premiums.”

So be wary of agents or distributors who ask you to be dishonest. An individual encouraging dishonesty may never be honest himself. Says  Dubey: “If an agent is encouraging such unethical behaviour, the customer should consider changing the agent immediately. Trust is important in insurance, especially since it’s a long-term commitment.”