Why CIBC Denied a Disability Claim & Steps to Avoid It
Donald had that experience when he was asked a series of questions for his mortgage insurance application. He did not mention the pain in his back and the arthritis in his spine. His doctor had said it was normal for someone of his age and there had been no pain since then.
He went on disability due to a problem with his neck that caused numbness in his arm and filed a claim to have his mortgage payments covered by his disability insurance. After investigation including a report from his doctor, his claim was denied because he failed answered “no” to this question:
During the past three years have you had or been treated for: mental or nervous disorder (depression, anxiety, stress, etc), neurological disorder including seizures, high blood pressure, kidney or urinary disorder, gastro-intestinal bleeding, back or knee pain, arthritis, other musculo-skeletal disorder or any other illness, disease, operation, injury or congenital defect not listed?
This is one of the questions that is read to you over the phone and you need to answer yes or no to it at that moment. If you answer yes, they will ask more questions. Don completely forgot about the arthritis on his lower spine that his doctor said was normal for his age and so he answered “no” to this question, as would almost anyone in his situation.
Here is an excerpt of the letter he got from the insurance company
The law is clear in its requirements for any Applicant for insurance neither to misrepresent any facts nor leave out any information that is material to the risk non-disclosure, as well as misrepresentation are legal grounds for the revoking the contract. This is why the applicant declares in the application that the answers given are true and complete.
When we reviewed your application for insurance, we found that, on January 31, 2011, you answered “no” to all the health questions. The medical records we received (from your doctor) as part of our claim assessment indicates that you had consulted your doctor for treatment of the following:
Lower back pain (Degenerative Disc Disease)
This information was not disclosed on your Application for insurance. Therefore question #2 should have been answered “Yes” for back pain.
The letter goes on to say that had he answered “no” to back pain, they would not have issued the disability insurance and that “renders your Certificate of Insurance null and void.” Therefore, we are rescinding your disability coverage.
They refused to take any calls on this. Since he issued the insurance from the insurance company directly, he did not have an agent to fight for him in this case. His lawyer felt that the cost to fight it would not be worth what he could receive.
Even if he had received the disability coverage, it would only pay for two years and Don has been told he will be off work for at least two years, at which point they will re-evaluate his situation. In fact, it is now unlikely that he will return to work as it involves physical activity. A traditional policy can be purchased to cover you to age 65.
There are two important lessons to learn from Don’s experience:
1 – Get Your Life and Disability Insurance from an Independent Insurance Agent
They will take the time to ensure you understand the questions and the underwriting is done prior to the policy being issued. Tell him/her everything you can think of, even if you do not believe it is important. They will also offer you coverage for a longer time period up to age 65 if you cannot do the normal duties of your regular occupation – a very important definition of disability.
2 – Have a Diary of All Your Visits to Your Doctor
A medical diary will provide you with the information you require when applying for insurance policies. I have kept one for ten years and it is now multiple pages. It would be impossible to remember all the details that it contains. In fact, I have printed it to be included with my last two insurance applications. I have looked at several “apps’ available on the internet, but a simple word document is easy to maintain if you do it right after your doctor’s visit. I had my doctor check it a few times for accuracy as well.
Following these two steps will ensure that you will get the best price for your life insurance and the benefits will be there when you need them.