Duty of Disclosure

Understanding your Duty of Disclosure

When you take out a life insurance policy it is essential that you understand your Duty of Disclosure to the life insurance company you want to be insured by.

Your ‘Duty of Disclosure’ refers to the information you must tell a life insurance company when applying for cover. Your Duty of Disclosure is legally enforceable and there can be dire consequences for not informing your insurer to the best of your knowledge.

When does your duty of disclosure end?

Your duty of disclosure ends when the life insurance contract is issued.

If you have recently applied for a life insurance policy and the application is still being underwritten/assessed and you have a change in your personal situation; whether it be medical, financial, occupational or any other relevant change; you need to inform your life insurance company straight away to ensure they have this information prior to the policy being issued.

This duty of disclosure applies to all increases, variations and instatement applications.

Who enforces your duty of disclosure?

Your duty of disclosure is enforced by the Insurance Contracts Act 1984.

Duty of disclosure extract

Before you enter into a contract of life insurance with an insurer, you have a duty, under the Insurance Contracts Act 1984, to disclose to the insurer every matter that you know, or could reasonably be expected to know, is relevant to the insurer’s decision whether to accept the risk of the insurance and, if so, on what terms. Your duty, however, does not require disclosure of a matter:

  • that diminishes the risk to be undertaken by the insurer;
  • that is of common knowledge;
  • that your insurer knows, or in the ordinary course of their business, ought to know;
  • as to which compliance with your duty is waived by the insurer.


Failure to comply – If you fail to comply with your duty of disclosure the insurer may void the contract within 3 years of entering into it. This is because the insurer would not have originally entered into the contract on any terms if you had failed to disclose all relevant information.

Fraudulent non-disclosure – If your nondisclosure is fraudulent, the insurer may void the contract at any time. An insurer who is entitled to void a contract of life insurance may, within 3 years of entering into it, elect not to void it but to reduce the sum that you were insured for in accordance with a formula that takes into account the premium that would have been payable if you had disclosed all relevant matters to the insurer.

This duty continues to apply until the insurer notifies you that the risk has been accepted. It also applies when you extend, vary or reinstate a contract of life insurance.

Your Duty of Disclosure & Life Insurance

It is essential that every Australian who takes out a life insurance contract understands their obligation under their ‘Duty of Disclosure’.

Your Duty of Disclosure is the first step a life insurance company checks when processing a life insurance claim payment. Your insurer will typically check your application form vs. your duty of disclosure.

If you need assistance understanding this or have recently come into difficulty around this issue please don’t hesitate to contact one of our specialist Advisers today!

Published: September 13, 2012

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