Hiding Facts While Buying Insurance? Know Why You Shouldn't!

There is no doubt about the fact that life insurance is a must-have in modern times. With increasing awareness about insurance and rising income levels, more and more people are investing in both life insurance as well as general insurance policies. However,this has also brought to light a large number of claims that have been rejected on various grounds,the most popular reason being providing incorrect information or withholding of material facts by the applicants of insurance policies while purchasing the insurance.

Consider this scenario: you are approached by an agent who wants to sell you a term insurance policy.You let him fill out the forms for you (because it is a very boring and tedious process). You take a cursory glance over the forms once he is done,and, without reading the fine print,sign the policy document.You fail to notice that you have been mentioned as a non-smoker even though you smoke.The agent did not even bother to ask you, probably because as a smoker,you would have to pay a premium that is 25-50% dearer than a non-smoker’s premium. A non-smoker’s policy, being likelier to get accepted, will ensure that the agent gets his commission without much fuss. Having signed the policy, you have just landed yourself (or rather your family) in deep trouble.

In case of your demise, your beneficiaries will have to approach the insurance company for the claim, and they are in for a rude shock:the insurer may reject the claim on the grounds of non-disclosure of material facts as you failed to disclose that you were a smoker.

The financial security of your grieving family has been compromised because of one piece of misleading information. And insurers show no leniency in this regard. Your bereft beneficiaries now find themselves in the middle of legal complications with the insurer and jeopardized finances,while dealing with immense stress and grief.

The rejection of a life insurance claim can wreak havoc in the lives of the beneficiaries, which is why it is best to avoid it by providing accurate information to the insurer while taking the policy - even if it means a slightly higher premium. Here are some fields in which accurate disclosure of material facts is an absolute must, failing which your claim may be rejected :


While smokers and regular users of tobacco in the form of gutkha and such products may have to pay a premium that is higher than the non-user premium by up to 50%, providing false information in this regard is a ‘penny-wise, pound-foolish’ move as this could lead to rejection of the claim.

While purchasing the policy, your premium will be based on the length of your addiction or the frequency of your usage of tobacco or alcohol. Even if you have quit smoking or the consumption of alcohol,the insurer will assess the number of years since you quit, as in most cases the negative effects of addictions remain for several years after quitting. Accordingly,your premium will be arrived at.
However,non-disclosure in this regard,while it may save you some money on the premiums,will cost you dearly in the event of the rejection of the claim.


You may wonder what your educational qualifications have got to do with your insurance policies. Well, a lot. Insurers associate a higher level of education with better earnings, more awareness about healthy habits and practices, and access to better healthcare facilities. It is for these reasons that insurers may be interested in knowing your educational qualifications. It ultimately helps the insurer arrive at an optimal premium rate for you.


It is imperative to disclose the exact nature of your job or profession as premium rates differ accordingly. The exact nature of your job would have a bearing on your lifestyle and the health risks you are exposed to and the non-disclosure thereof may lead to the rejection of your claim. Here are a few examples to elaborate on that:

  • A person with a sedentary job would be at a greater risk of obesity and cardiovascular disease. At the same time, a job that requires a lot of travelling would involve increased risk too. The insurer would take these factors into account before arriving at the rates of premium. However, even though the premium charged may be a little higher under certain circumstances, if such facts are not disclosed, it could lead to the claim being rejected.

  • Individuals who work in factories or handle intricate machinery are often considered to be at high risk, keeping in mind occupational hazards like machine accidents,

  • Exposure to toxic chemicals and gases etc. Under such conditions, declaration of all material facts pertaining to the nature of work is absolutely essential. Otherwise, one loses one’s life at work,the insurer can reject the claim in the absence of information regarding the nature of the job.For example,a software engineer primarily has a desk job, but a chemical engineer who has to supervise work in a fertilizer manufacturing unit has to move around the factory and may be exposed to hazardous chemicals or gases. In this case, while both the individuals are engineers,the latter stands at a greater risk at work, and consequently would require a larger premium amount for coverage. Also, the insurer may reject the claim in such cases if the material nitty-gritties of the job are not disclosed.

  • Apart from risk factors,insurers prefer salaried individuals as they have regular inflows of cash and are less likely to default on premium payments. Accordingly, they may get slightly better rates of premium. However,for freelancers and businesspersons whose cash inflows are variable, the premium may differ as per the assessment of the insurer.


Insurers arrive at the amount for premium after scrutinizing the medical history of the applicant.However,certain facts pertaining to the medical history of the family of the applicant,such as genetic diseases running in the family or any vulnerability thereof,may not be readily available in medical records. Thus,to ensure transparency, it is best to disclose all such facts at the time of taking the insurance,failing which the insurer may reject the claim if the death of the insured occurs as a result of genetic diseases or any medical condition that was concealed from the insurer at the time of taking the insurance.

  • Generally, the premium for life insurance is not impacted by genetic diseases that do not threaten the insured individual’s life, but genetic diseases that may pose a risk to the insured person’s life make the insurer cautious and the premium may be set accordingly.

  • It is a good idea to undergo a thorough medical checkup before taking the policy. The policies which involve a medical examination generally offer a cheaper premium than those which do not demand the tests. This is because, for policies without medical tests, the insurer may charge you a higher premium factoring in the possibility of poor health. However, when you undergo a medical examination in the process of taking the policy, the insurer can examine your reports and satisfy itself with the state of your health. This ensures transparency and greatly reduces the chances of some important facts getting missed out, and, in turn, reducing the chances of your claim getting rejected.

To sum up,it is absolutely necessary to disclose all material facts regarding the life of the applicant to the insurer at the time of taking the policy.It is important to note that, when the claim gets rejected, the applicant will not be around to provide an explanation; rather, it would be the grieving loved ones who would have to handle the entire pressure. It would be a lot more prudent to think ahead and disclose the correct facts to the insurer, as otherwise, you would end up subjecting your loved ones to a lot of hassle, legal issues and complications at probably the worst time. Even though you my save some money on the premiums because of non-disclosure of material facts, in the long run, it will cost your loved ones dearly.


Please be informed that under the newly amended Section 45 of the
Insurance Act,1938
, effective from 26th Dec 2014, no claim can be rejected after 3 years of policy issuance on grounds of non-disclosure.The insurer has a three year window to reject a claim on grounds of non-disclosure/improper disclosure of facts, however,if the insurer is able to prove that the claim is fraudulent,then claim could still be rejected.To be on the safer side,always disclose complete and correct information and protect your loved ones from unnecessary future inconvenience.