Yours, Utmostly & Faithfully

Posted 30 September, 2015 by Surely
in Technical Smechnical

You may have come across this term “utmost good faith” when dealing with insurance matters.
Does it mean absolute honesty ?
What do you actually need to reveal or to disclose?

Faithful & true, your best friend.

Faithful & true, your best friend.


Utmost good faith is derived from Latin phrase, uberrimae fidei (“most abundant faith”).
It simply means that both the proposer (likely you) and insurer have the duty to disclose all relevant facts honestly and openly when formulating an insurance contract.
This principle is only applicable to insurance agreements and not to all contracts.

Application to your insurance policy

If you are intending to sign up for an Insurance Policy, Utmost Good Faith will be applicable.
By virtue of this principle, you are responsible for supplying honest, accurate information to the insurer (and vice versa).
This is especially critical when you are filling up the proposal form.

If you breach this principle by misrepresentation (i.e. lying on the proposal form), the insurer reserves their right to avoid the policy.
That is to say, you are no longer covered by the policy.
Worse, depending on nature of your misrepresentation, the insurer may not return the premium to you.

What is misrepresentation ?

It is basically a false statement that induces the insurer into the contract.
A misrepresentation has the following characteristics

  1. A Statement of Fact (as opposed to opinion)
  2. Material (it must affect the decision of a prudent underwriter)
  3. Cause some loss/disadvantage to the insurer

For example, if you fail to disclose that you have a heart condition, it is a statement of fact, material and definitely will cause the insurer some dis-favour.

Why should it matter to me ?

You may have devised a complete and flawless coverage for your financial needs and goals.
However, due to a careless oversight resulting in void of your policy, your plan may now have a huge gap.
You may have purchase a replacement policy to cater for the financial gap and found that the premium may have risen or you may be declined, due to pre-existing health condition.

It also matters because your insurer may discover the misrepresentation and then avoid the policy at the point of claim
It will be at the time where you needed the compensation the most.

What should I do ?

Basically you have to answer the question as truthfully as you can.
If you are unsure, just review whether it is a fact, material and potentially disadvantageous to the insurer.
You may also contact a Consultant or the insurer itself to make sure everything is in order.

If I reveal certain health condition, the insurer may decline my proposal.

Yes, that may occur.
However, at the same time, the insurer may choose to accept the proposal, impose higher premium or excess or exclude the declared health condition.

After all, not having full coverage is better than having no coverage at all.
You may also shop around for other insurer if you are unable to obtain the policy at your terms.
Not all insurer have the same underwriting requirements and some may waive that condition.

TLDR version (Too Long, Din Read)

Honesty is the best policy.

Help !!! This post has too much Insurance Lingo. aims to eradicate the knowledge gap between consumers and Life Insurance. Our Vision is that one day, every Man, Woman, and Child will be properly insured.

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