What Is Utmost Good Faith and Duty of Disclosure?

At the set up stage, automobile insurers heavily rely on applicants providing accurate information so that premiums quoted reflects the risks they are taking on. Once it is sold, motorists start counting on the coverage to pay for their reasonable losses. This concept of dual trust is a key component that forms the bases of any agreement and without it things can get unreliable for both parties. So, let’s have a look at what are these definitions in layman’s terms?

Auto insurance policies are contracts that bound both parties. Utmost Good Faith requires both sides to observe and honor this contract conditions. In layman’s term, the information you exchange with the underwriter must be absolute truth. Both parties should be open and honest with each other to the best of their knowledge. You cannot help if you didn’t know about an issue but you should have taken all the measures to make sure nothing omitted. In the same way, vehicle insurers should take every step to explain the terms plainly for their customers.

Duty of Disclosure requires applicants to inform their agents of any material facts that can affect the calculation of premiums. For example, any facts that show the drivers included may be high risk should be disclosed. Especially, policyholders must not knowingly withhold information or provide misleading and incomplete details. And the schedule must clearly document under which circumstances you may not be covered and how claims work. If there are any conditions and exclusions they should be clearly stated in the documents.

In simple terms, policies should not be unambiguous or open to subjective interpretations. And motorists should not have a secret agenda of avoiding paying higher premiums by being economical about the truth. If you know about something you should tell and tell it in a timely fashion. This open communication reduces problems in the future when you have a claim. And they can go back to the policy document and point out the relevant section when there is disagreement. It would be terrible to find out after a claim that they are disputing it based on technicality or newfound details.

It is unavoidable that there will be cases of dishonesty or intentionally holding facts. There may be legal consequences of attempting to defraud. Alternatively, companies can ask people to pay the premiums avoided because of such actions. The opposite can be seriously problematic and therefore, it is very important to find a car insurance company you can trust. Otherwise, it is hard for an ordinary person to see such sneaky wording inserted in the paperwork.