Don't make this terrible insurance mistake

Fail to declare this to an insurer and you could void your policy.

Insurance companies often impose blanket bans on anyone with an unspent conviction. This even applies when the conviction bears absolutely no relevance to the type of insurance required.

Now we all know insurers will do almost anything to wriggle out of paying a claim. Just take a look at this story: A policyholder made a claim on a home insurance policy following an arson attack on her home. The insurer has since demanded she repays the £240,000 claim for rebuilding costs because she failed to disclose a fine for overpayment of benefits. If she had declared the conviction, the company says it would have refused to insure her.

This treatment may sound harsh but it's by no means an isolated incident. There are currently more than 7.3 million people with convictions on the Home Office's offender index database. In fact, by the age of 46, one in three men has a criminal record (excluding driving offences). This suggests the issue could be far more widespread than we might imagine.

Unspent convictions - what has to be disclosed?

Insurance applicants must disclose any 'unspent' convictions when they apply for insurance. By law, you have a duty of disclosure even if the insurer doesn't directly ask. You must declare all material facts which would have a significant effect on insurer's assessment of risk in relation to offering you a policy.

Once a conviction is 'spent', you are no longer obliged to disclose it in law. Even a spent driving offence, for example, can be legally left out of an application for car insurance.

The table below outlines the length of time before convictions can be considered spent as set out in The Rehabilitation of Offenders Act (1974). The time before a conviction is spent has nothing to do with the nature of the offence itself, but it's determined by the length of the sentence given:

When is a conviction spent?

You'll notice the time period before a conviction is spent is far longer than the actual sentence itself. In law, this is seen as the required length of time for an offender to be 'rehabilitated'. Note that where a prison sentence of 30 months or more was given, the conviction is never considered 'spent'. In this case, it must always be disclosed for insurance purposes.

And, just as worryingly, absolute discharges - where the accused was found guilty, but discharged by the court without a conviction being recorded - must also be declared as unspent for a period of six months.

A tricky dilemma

If you have been in trouble with the law, you may find yourself caught between a rock and a hard place. Declaring an unspent conviction could lead to an automatic exclusion for insurance. This is particularly the case if you have a conviction for arson or fraud, as insurance firms take these convictions very seriously indeed (for obvious reasons).

If you are refused insurance, it can have terrible consequences. For example, mortgage lenders are unlikely to offer you a mortgage if you can't get buildings insurance, and you'll be unable to drive legally without third-party car insurance.

But keep an offence quiet and it could lead to a policy being invalidated, or a claim being rejected, further down the line. In a worst case scenario, a homeowner could even have their mortgage rescinded, if a buildings insurance policy becomes invalid, and cover can't be obtained elsewhere. This means you could be forced to sell your home to pay back the lender, or face possible reposession.

Often people simply don't know they're obliged to make unspent convictions known to insurers. In fact, policyholders could be paying premiums year after year without even knowing the policy is actually invalid.

Even worse, where you apply for home insurance or buildings insurance, you're also obliged to declare unspent convictions for anyone who lives in your home. This also applies to landlords in relation to their tenants.

Help! My insurance has been invalidated or my claim rejected

Remember, insurers are very adept at coming up with reasons to reject your claim. An insurer could, for instance, try to void a policy on the basis of a previously undisclosed spent conviction which has come to light, especially if it is considered relevant to the risk assessment of the policy.

If this happens, you can appeal to the Financial Ombudsman Service (FOS) because, as I mentioned earlier, you are not legally obliged to declare any spent convictions an insurance application. But sadly, there's no guarantee of success, and each case will be treated on its own merit.

Help! I can't get insurance

Not all insurers automatically ban applicants with unspent convictions. But if you're having difficulty getting accepted for a policy, or at least getting accepted at a reasonable price, try a specialist broker instead. Even applicants with relatively minor offences can feel uninsurable if they're rejected.

Try UNLOCK, the National Association of Reformed Offenders, which has helped to set up a panel of 17 insurers who specialise in providing a broad range of insurance policies for people with unspent convictions. You may find the premiums offered are higher than mainstream insurance policies, but this isn't always the case.

Take a look at UNLOCK's list of insurers (pdf) and check out their tips on getting the right policy. Don't forget you'll still need to declare any unspent convictions just as before.

Finally, if you have a specific question about insurance and convictions, why not ask for help from other lovemoney.com readers at Q and A.

More: Don't fall for this sneaky financial swindle | Britain's worst insurer!