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You’re about to buy life insurance, and you engage in some risky behaviour. It’s nothing to be ashamed about, but it could affect your life insurance rates. You’re wondering whether you should really bother disclosing pertinent details about your lifestyle. After all, it’s none of the insurance company’s business what you do on your own time, right? Not so fast. Insurance contracts stipulate that you must reveal all material information that an insurer might use to make an underwriting decision. In other words, you can’t withhold information that an insurer might use to decide whether to issue an insurance policy on you.
Perilous Activities
Insurance companies can insure all sorts of risks, as long as they know about them in advance. Likewise, you’re under no obligation to buy life insurance from anyone. A problem arises if you ever decide to withhold information that an insurance company needs to make a proper decision about issuing your life insurance policy.
Insurers have to charge more money for what they call “perilous activities” because these activities increase the risk of premature death – something the insurer needs to keep an eye on to make sure that it can pay all claims as they arise.
Some of these activities include:
- Base jumping
- Bungee jumping
- Car, bike, or powerboat racing
- Hang gliding
- Hot air ballooning
- Parachuting
- Scuba diving
- Skiing
- Skydiving
- Surfing
- Any flying you do that isn’t as a passenger
- White water rafting
Seems unfair that you pay more for engaging in these activities? Well, the consequences of withholding this information will seem a lot more unfair.
Why it’s Important To Tell The Truth
Life insurance quotes are dependent on you disclosing all relevant information. Unfortunately, if you don’t disclose that you take weekend skydiving classes, and you die as a result of an accident, the insurer could contest the life insurance claim for up to 2 years after the policy is first issued – called the “incontestability period.” Beyond that, the insurer must only prove fraud on the application to deny a death claim. In other words, it always pays (for your family) to tell the truth.
Bad Habits That Drive Up Rates
It’s not just overtly risky hobbies that drive up rates. Lifestyles and habits can too. Bad habits like tobacco use and excessive alcohol consumption may get you rated-up, paying extra premium for the risk you pose to the insurer. Drug use, a poor driving record, or even health problems like high blood pressure or cholesterol can also affect your premium rates.
But, unlike risky hobbies, it’s relatively easy to get re-rated for some habits. For example, if you smoke, quit. After you’ve quit for 12 months, you can re-apply for a new risk class rating. That’s right – buy the insurance now, pay the higher premium, and then later try to get re-rated. Insurance companies do this all the time.
As long as you’ve been tobacco-free for at least 12 months, many insurers will re-rate you as a “non-smoker.” Your rate drops. You live happily ever after.
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