Lying while taking health insurance can invite big trouble later – Here’s why

• When obtaining health insurance, it is essential to disclose pre-existing conditions.
  
• Withholding information about pre-existing conditions can result in claim denial and cancellation of cover.
  
• Disclosure of pre-existing diseases may result in higher premiums, waiting periods, exclusions, or in a few cases, denial of coverage.
  

The principle of utmost good faith is a cornerstone of insurance contracts. It basically means being honest, fair, and open when dealing with others in legal agreements. It's about being trustworthy and not trying to trick or deceive anyone. This principle helps build trust and fairness in relationships and deals.

If you lie about existing health conditions when taking health insurance, your claim is likely to be rejected.

“Withholding information about pre-existing conditions violates the principle of utmost good faith and any such non-disclosure while taking up the policy can result in claim denial and cancellation of cover ab initio thereby resulting in financial hurdles for the policyholders at the time of their need,” says Parthanil Ghosh, president, retail business, HDFC ERGO General Insurance Company.

So, disclosing pre- existing conditions is important because it will help the insurance company assess risk and determine coverage. If you have done a proper disclosure, it will also help you avoid claim denials.

Even if you have been paying the premiums for a decade, if you have not disclosed pre-existing conditions at the time of taking the policy, your claim could be rejected.

This would mean that you have to pay the entire hospital bill out of your own pocket. “This creates a lose-lose situation, where the policyholder has invested considerable resources in insurance coverage, only to discover that it fails to provide the necessary financial protection in times of genuine need due to non-disclosure of pre-existing conditions,” says says Siddharth Singhal, business head, health insurance, Policybazaar.com.

To avoid such a scenario, customers should fill the proposal form themselves (not leave it to an intermediary) and declare all pre-existing conditions and details of previous claims taken.

“Customers should also go through the policy document to gain a thorough understanding of policy terms and conditions, ensure their declared pre-existing condition has been recorded and understand the waiting periods and exclusions of the same,” says Ajay Shah, head, distribution, Care Health Insurance.

What happens when you disclose pre-existing conditions

People tend to lie about their pre-existing conditions when buying health insurance as they are scared that their premiums will rise. Higher premiums are likely if one discloses pre-existing diseases for obvious reasons.

Disclosing of pre-existing diseases may also mean that the policy comes with a waiting period. Some insurers have waiting periods for coverage of pre-existing health conditions. During this period, typically lasting from a few months to a couple of years, the insurer does not cover medical expenses related to the pre-existing condition.

“However, there are many new products in the market now, which have reduced the waiting period for their policyholders. It is advisable to understand this in detail before buying your health insurance,” says Shah.

In some cases, in case you disclose a pre-existing disease, your health insurance policy may also come with certain exclusions for those conditions.

The insurance company may also offer you a different product or in some cases deny you the insurance, in which case you may approach another insurer to get the protection you require.

When it comes to health insurance, any mistake may prove costly, so it is important to be careful.