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Friday 29 August 2014

Honesty is the best policy so be upfront with insurers

Louise McBride

Published 30/03/2014 | 02:30

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Keeping mum about your penalty points and love of the fags or drink could save you hundreds of euro a year in insurance – even thousands.

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However, should you have to make a claim, particularly a serious one, you could be faced with a bill running into hundreds of thousands of euro – because many insurers will refuse to pay out if you haven't been upfront with them.

So what are we most likely to lie to our insurer about – and what could happen if you're caught out?

Penalty points

One of the biggest fibs people tell when they're buying car insurance is that they don't have any penalty points.

The reasons are clear. If you have four penalty points, you could pay between 20 and 25 per cent more for your insurance than someone who has none, according to Conor Faughnan, director of consumer affairs with AA Ireland.

"If you have six or more points, you may find yourself unable to get cover from the bigger outlets," says Faughnan. "Insurers do check penalty points – even if they don't do so at point of sale. They certainly check in the event of a claim."

If you're not honest about your penalty points, your insurer could refuse to pay out for the cost of damage if you're in an accident. It could also cancel your policy. "Even if your insurer is on the hook for third-party damage, for damage to another car, they may chase you for the money afterwards," says Faughnan.

Some insurers have introduced high excesses (the first part of a claim you must pay yourself) for drivers who lie about their penalty points. For example, Aviva has an excess of €2,500 for such drivers.

Fond of the drink

If you consider yourself an average drinker, but consume a bottle of wine a night, chances are your life insurer won't agree.

Insurers will usually consider you a heavy drinker if you are a man who has more than three to four standard drinks a day, or a woman who has more than two or three tipples a day. If you're a heavy drinker or have a history of alcohol abuse or dependence, this will push up the cost of your life assurance. However, if you don't disclose a harmful drinking pattern to your insurer at the outset, it could refuse to honour a claim.

"Given that over half of all Irish drinkers have a harmful pattern of drinking, the actual consumption of alcohol stated on proposal forms [which you fill out when applying for insurance] for life cover appears to be extraordinarily low," says John Geraghty of online brokers LABrokers.ie. "In a large proportion of cases, people appear to underestimate their average."

If you have a history of alcohol dependence, you could pay up to three times more for life cover – if you can get it.

If you are an alcoholic who is still drinking, you'll struggle to get life cover. If you're a recovered alcoholic, you should be able to get cover – but you will usually have to wait a year or two before the cover kicks in. "Insurers will increase the premiums of recovered alcoholics by between 50 and 300 per cent, depending on how long the person has abstained from alcohol for," says Geraghty.

If your alcohol addiction has triggered medical conditions, you could pay even more for your insurance – or you might not be able to get cover.

False country address

Faced with car insurance premiums running into the thousands, young drivers often try to bring down the cost of their cover by saying they live in the country – when they don't, according to Faughnan.

The cheapest counties for car insurance are Roscommon, Kerry, Waterford and Wexford, says the AA, while Limerick, Donegal, Louth, Longford and Dublin are among the most expensive. The average driver in Roscommon, for example, pays about 16 per cent less than the average Dublin driver does, according to the AA.

"Some people are tempted to use a parent's or other relative's Roscommon address for insurance purposes, when they actually live in Dublin or elsewhere," says Faughnan.

"However, the savings are usually tiny relative to the premium – and of course, there is the possibility that a claim would not be paid. The few bob saved will be very expensive if you ever have to make a claim."

Parent drivers

Another lie often told by young people (or their parents) is that the parent is the main driver on a car owned by a child.

"Parents often try to save a few quid for their children by insuring the kid's car in the parent's name," says Faughnan. "If the child is the registered owner of the car, the parent has no insurable interest in the car – so the insurer will not pay out in the event of a claim.

"Insurers are taking a really hard line on this. They are investigating any cases that look suspicious and requesting proof that the car is in fact the parent's and that the parent is the main driver of the car. If they're not satisfied, they can cancel the policy."

Depression

If you or your partner suffers from depression, you must tell your insurer before you take out life cover. Although not everyone who suffers from depression takes their own life, the illness is one of the main causes of suicide. Life insurance policies will generally cover suicide – although there is usually a waiting period of a year before the cover kicks in. If your partner suffers from depression and commits suicide, if the illness wasn't disclosed when the life cover was first taken out, and your insurer later finds out about it, your insurance will most likely be null and void.

If this happens, you won't be entitled to any lump sum to cover the financial needs of you and your family, including any mortgage which has to be repaid.

If you or your partner suffers from severe depression, not only are you likely to pay more for life insurance, you could find it hard to get cover.

"If you suffer from depression, the insurer will usually increase your premium by between 50 and 150 per cent, depending on the severity," says Geraghty. "If you've got a history of severe depression, you might not be able to get life cover.

"If you have attempted suicide, an insurer won't usually consider covering you for at least two years after the attempt – and after that, there will be a moderate additional charge for at least four years, and possibly an extra permanent charge, depending on the underlying cause."

Social smoker

Just because you only light up on a night out doesn't mean your insurer won't consider you a smoker.

"Insurers don't differentiate between someone who lights a cigarette to celebrate the New Year – and someone who never smokes," says Geraghty. "A person who smokes just one cigarette a year is considered a smoker and should disclose the fact that they are a smoker."

Smokers pay more for life cover because they have a higher risk of dying from smoking-related diseases than non-smokers do. If you're a 35-year-old moderate smoker for example, you could pay about 70 per cent more for life cover than a non-smoker will.

If you smoke more than 20 cigarettes a day, you could pay almost three times more than a non-smoker.

Love handles

When applying for life cover, you must tell your insurer your height and weight.

Don't lie about your weight. If you are seriously overweight, and you haven't been upfront about that, your insurer is unlikely to pay out should you have to make a claim.

"Underestimation of weight is a common fallacy," says Geraghty. "Writing a lower weight on the application is misleading because it usually makes you appear healthier than you actually are. Those who are underweight or obese may be charged more for cover. Those who are morbidly obese may be declined cover."

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