Before we enter into such a contract, we need to understand the obligations we’re undertaking and the consequences of dishonesty.

INSURANCE CONTRACTS

Firstly, such a contract is necessary. The insurer undertakes the risk, so it must be able to rely on the information you have provided. It has to be accurate. So, in order for the insurer to be certain of this, you will have to answer a number of questions before the contract can be entered into.

Once the policy is in place, the insured party is then under obligation to inform the insurance company of any changes. This could include:

• Changing your address (residential or work);
• Modifying your vehicle;
• Getting married;
• Changing your car details, such as a new licence plate number.

If you fail to do this, it’s considered a breach of good faith. As such, it may place your contract at risk. This is pretty simple to understand.

If you live in a nice neighbourhood with a low crime rate and take out an insurance policy for your car, your premium will be lower because your vehicle isn’t at high risk. Now you move to a neighbourhood with a highcrime rate – you don’t let the insurer know and your premium stays the same – and then your car gets stolen. The insurer then finds out that you have failed to inform them of your move. You’ve put your vehicle at greater risk.

This means that for the last while, your premiums have not been calculated accurately.

Not only could the insurer then refuse to pay out your claim, but it could also affect your standing with all other insurers. Either way, there will be consequences and your contract will suffer. Let’s have a look at how that might happen.

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