The Declined Income Protection Application
Priya, 41, is a self-employed graphic designer earning £62,000 a year. She has no employees and no sick pay. Eighteen months ago she was treated for a single episode of low mood with six sessions of talking therapy; she stopped after four sessions and has had no treatment since. She is applying for an income protection policy with a 13-week deferred period and a benefit of 60% of earnings. The insurer's underwriter has written to say the application is declined on the basis of the mental health history. Priya says she is now symptom-free, her GP has confirmed this, and she wants to know whether she can simply apply to a different insurer without mentioning the therapy. She also asks whether a longer deferred period would help. She has £9,000 in savings and monthly outgoings of £2,400.
1. Advise Priya whether she may omit the therapy history from a fresh application, and explain the consequences of doing so.
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She may not. An application for protection insurance is a contract of utmost good faith, and the consumer insurance disclosure rules require her to answer the insurer's questions honestly and with reasonable care and not to make a misrepresentation. A deliberate or reckless omission of a treated condition is a misrepresentation.
Consequences if she omits it:
- The insurer may avoid the policy (treat it as never having existed) and refuse all claims, repaying only premiums, if the omission was deliberate or reckless.
- If the omission was careless, the insurer's remedy is proportionate: it may reduce the claim payment to reflect what it would have charged or excluded had it known.
- A declined application is normally recorded on the application history, and many insurers ask about declines, so a fresh non-disclosure can surface at claim stage.
The correct route is a fresh, fully disclosed application, ideally with a cover letter from her GP. The previous decline does not make her uninsurable; different insurers have different appetites for disclosed mental health history, and a specialist or impaired-life market exists.
2. Assess whether extending the deferred period from 13 weeks to 26 weeks is a sensible response, given her savings and outgoings.
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The deferred period is the waiting period before benefit becomes payable. A longer deferred period reduces the premium because the insurer bears less short-term risk.
Her position: monthly outgoings £2,400; savings £9,000. That is roughly 3.75 months of cover. A 26-week (6-month) deferred period would leave a gap of about 2.25 months that her savings cannot bridge, unless she can reduce outgoings or access other funds.
A 13-week deferred period aligns much better with her £9,000 buffer (about 3 months of outgoings). Extending to 26 weeks saves premium but creates a real cash-flow hole exactly when she is most vulnerable as a sole trader with no sick pay.
Judgement: the deferred period should be set by her ability to self-fund the waiting period, not by premium alone. A 13-week deferral is the better fit; if affordability is the driver, she should consider a lower benefit amount or a policy with a rehabilitation/back-to-work support service rather than stretching the deferral beyond her savings.