Smoking after Taking out Life Insurance

SuzieGirl · 18 July 2011 at 2:59AM

Hello

I wonder whether anyone can give me some advice.

My friend is having a problem getting her late husband's life insurance paid out because he had smoked off and on in the few years prior to his death.

He took out life insurance over 10 years ago and the application form asked if he had used any tobacco products in the past 12 months. At the time he hadn't smoked for over 2 years so, quite rightly, he ticked the "no" box on the form.

A couple of years later he started smoking again. not regularly but at social events etc.

The insurance company say he should have told them he'd started to smoke again and have rejected the claim. Is that right? Can they do that? I must say I was surprised.

Such a distressing time made worse by this awful situation.

I'd appreciate any advice which I can pass on to my distraught friend.
Thank you

keith1950 · 18 July 2011 at 5:15AM

Hi, as well as asking about smoking in the previous 12 months before the start of the policy, all life insurance documents I have seen have forms enclosed saying that you MUST notify them of ANY change to the initial statement of terms and conditions.

I am sorry but he appears to have voided the policy himself.

vaio · 18 July 2011 at 11:40AM

Presumably they would still have offered cover to him as a smoker but at an increased premium in which case they should pay out pro rata to the premium he did pay compared to what he should have paid.

Give the FOS a ring to discuss.

If the policy doesn’t mention the need to notify the change then they should pay out in full.

ExpertAdvice · 18 July 2011 at 11:48AM

After reading your post, I spoke to underwriter of one of the major insurers and they said that when the policy is taken out, it is underwritten as per the medical conditions and other facts at that time.

Just like any other medical condition, you dont need to notify them of change in smoking habits and they would still pay the full claim in case of death.

But, of course it would depend on the T&Cs from insurer to insurer. Why dont you have a look at their T&Cs and try to find out what it says? If it mentions clearly that you need to notify them, then they wont pay out but if its otherwise, you have a case!!!

Best of luck!!!

vaio · 18 July 2011 at 4:13PM

ExpertAdvice wrote: »

After reading your post, I spoke to underwriter of one of the major insurers and they said that when the policy is taken out, it is underwritten as per the medical conditions and other facts at that time.

Just like any other medical condition, you dont need to notify them of change in smoking habits and they would still pay the full claim in case of death.

But, of course it would depend on the T&Cs from insurer to insurer. Why dont you have a look at their T&Cs and try to find out what it says? If it mentions clearly that you need to notify them, then they wont pay out but if its otherwise, you have a case!!!

Best of luck!!!

Not exactly right because they also have to abide by the FOS rules on non disclosure as part of the “treat the punter fairly” ethos.

Obviously cases vary and this is just advice off a random bloke on the web but the general thrust of their rulings that I’ve seen is…

The need to disclose facts & changes must be “clear & unambiguous” so phrases like “you must disclose all material facts” are worthless. If the need to disclose was not clear & unambiguous then OP should get paid out in full.

Non fraudulent or inadvertent nondisclosure generally gets treated one of two ways:

If they would not have offered/continued cover had they been aware of the true facts then the policy is treated as if it never existed and the OP would get all the premiums back.

If they would have offered cover but would have charged a higher premium then the OP gets paid out pro rata based on the premiums they did pay compared to the premiums they should have paid.

ExpertAdvice · 18 July 2011 at 4:29PM

I dont necessarily agree with you VAIO. I would think that the policy is either valid or invalid so not sure about the pro rata business.

If their T & Cs clearly states that you need to notify the smoker/non smoker status and you dont, i think you are voiding the policy and they wouldn't be under obligation to pay anything. But I'm not 100% sure on this one so dont mark my words. First thing would be to check the T&Cs and then speak to FOS and see what they have to say.

vaio · 18 July 2011 at 5:18PM

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/46/46_non_disclosure_insurance.htm is worth a read, the pro rata bit is towards the end

MoneyBox_2 · 18 July 2011 at 8:17PM

Was it a doctor's report that informed the insurance company that your friend's husband had taken up smoking again ?

I'm not familiar with the procedure carried out after a death and am wondering how they know.

SuzieGirl · 18 July 2011 at 10:30PM

Thank you all very much for your replies.

Moneybox: They actually asked my friend directly whether he smoked and she said he did very occasionally. She made it absolutely clear that he had been a non smoker at the time the insurance was taken out and for several years afterwards.

Obviously she's kicking herself for being so honest but she wasn't really thinking clearly at the time. He didn't die from a smoking related illness so it seems very unfair whatever.

Reading all the replies I think her best bet is to go to the FO for help and advice. I don't know how clear and unambiguous the information was regarding letting them know of future lifestyle changes. I mean, what if he'd taken up hang-gliding or motorbike racing or drinking heavily or developed a cocaine habit? All things which increase your risk of early death. Unless you die from actually doing one of those things - how would they ever know? They didn't ask her how much alcohol he drank each day. Isn't it blatant discrimination to ask about smoking and no other high risk activities?

I don't know. I'm just really upset for her and everything she's dealing with at the moment. She's on the verge of losing her home as the insurance was meant to clear the mortgage and she can't manage the repayments on her own.

dunstonh · 18 July 2011 at 11:07PM

There is a test that can be done (i believe its a non evasive test that requires just one hair) and from that they can tell how much someone smokes and for how long. They can tell if its passive smoking or actual smoking too.

kingstreet · 19 July 2011 at 10:29AM

It's a cotinine test and it's routine. It can be carried out on a deceased person.

I always use it when persuading clients not to lie about their smoking habits at application; along with my "don't give an insurer any excuse to decline your claim."

Smoking after Taking out Life Insurance

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