Concealment

What Is Concealment?

Concealment is the omission of information that would affect the issuance or the rate of an insurance contract. If the insurer has no access to the nondisclosed information and that information is material to the decision-making process, the insurer can nullify the insurance contract.

Should the provider learn of withheld information after the policyholder files a claim, the provider may refuse to pay out on the claims related to the concealed information.

Understanding Concealment

Concealment applies any time an insured party fails to provide information to an insurer that could affect the terms of the policy. Note that this includes situations in which an insurance company does not ask a direct question about the information in question. Insurance policies generally lump concealment in with misrepresentation as a reason to void or alter a contract.

Whether a policyholder is found to have misrepresented or concealed salient information purposely or by accident, insurers reserve the right to alter or void policies when they discover the omission or misrepresentation.

Smokers have a higher likelihood of encountering health issues than non-smokers, so many health, life, and disability insurance policies request information about whether or not a policyholder uses tobacco products or has a history of tobacco use. Suppose the policyholder was a regular smoker but quit ten years ago. If they marked no in answer to a question about having a history of smoking, they would be engaging in misrepresentation. 

If instead, the application asked an open-ended question about a person’s health history, and the individual failed to mention smoking, that would be concealment. In either case, if that person wound up dying of lung cancer or emphysema, the insurance company could deny payment of a life insurance claim if it discovered that individual’s history of smoking.

Concealment During Warranty

For an insurer to cancel a policy, the policy must include questions worded as conditional warranty statements, which some insurance policies will often include.

These questions will be vital to the decision to provide coverage and to the premium price. With these statements, the applicant clarifies that the answers they give are true and accurate. As an example, health insurance applicants may need to warrant that they do not have a terminal illness at the time of application.

Warrants may be affirmative or promissory.