Definition
Non-Disclosure
Non-disclosure is the failure to reveal a material fact to the insurer, which can render a policy voidable or lead to claim rejection.
Non-disclosure, whether innocent or deliberate, breaches the duty of utmost good faith and is the leading cause of disputed claims in India, especially the concealment of pre-existing diseases in health and life cover. Insurers can repudiate claims and even cancel the policy.
Protections temper this: Section 45 of the Insurance Act bars insurers from challenging a life policy after three years from commencement except for fraud, and the health moratorium period offers similar certainty. Still, the safest course is complete and honest disclosure at the proposal stage.
Related terms
- Utmost Good FaithUtmost good faith (uberrimae fidei) is the duty of both parties to an insurance contract to fully and honestly disclose all material facts.
- Material FactA material fact is any information that would influence an insurer's decision to accept a risk or the terms and premium it sets.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.