Duty of disclosure and declaration of material facts

Sep - 03

Duty of disclosure and declaration of material facts

Duty of disclosure and declaration of material facts

What is meant by Duty of Disclosure?

It is a requirement of the client or insured person to declare to the Insurer any material fact which could influence an insurer in respect of premium or acceptance of cover for a risk.

Facts such as previous bankruptcies, criminal offences, prosecutions or special terms imposed on insurances are all classed as material facts. In additional if any of your insurances have been cancelled or refused renewal by insurers this must also be disclosed.

Material facts are not just serious facts, they are facts which could affect the risk such as security measures at premises, type of building construction, being situated next to a hazardous premises such as a petrol station or being located in an isolated area or close to a water course, lake or river.

With this information an insurer is able to determine whether the risk is acceptable to them, if a premium loading is required to accept the risk and/or if any special terms or higher excesses are to be applied.

So, what happens if you don’t disclose??

Well, firstly Insurers have the right to void the policy from inception. In effect this means they would be entitled to act as if the policy never existed and to seek recovery of all claims already paid out although they would be obliged to repay the premium to the client in most cases.

The actions Insurers would take would depend upon each separate case however DO NOT take the chance, make sure you declare all material facts.

This does not just apply at inception of the policy, this would apply to changes in the risk throughout the policy term.  For example if you decided to remove or change an alarm system, replace the windows or doors, expand into the unit next door…….these are all material facts which must be disclosed.  Insurers will then endorse the policy to note acceptance of these changes and if necessary charge an additional premium.  The facts have been disclosed therefore in the event of a claim Insurers are fully aware of the risk they are protecting .

Please feel free to call us on 01623 397300 if you have any queries on Duty of Disclosure

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