Husband of woman denied life insurance regrets honesty about mental illness.

A man whose wife was denied life insurance after she disclosed that she had had depression says he rues the day they were honest with the insurance company.

Six years ago Glen Smith and his wife Carmel were advised to take out a life policy with their superannuation.

But because of her history of mental illness, she was denied the life insurance.

“I’m sure there must be many, many people which are out there who have depression and they haven’t actually disclosed that,” Mr Smith told 7.30.

"But because my wife was honest and did disclose it, she was knocked back. So my suggestion is don't disclose it."

Like many Australians, Ms Smith was occasionally depressed and received treatment accordingly, but she was not suicidal.

"I think it's terribly unfair," Mr Smith said.

"Especially for somebody who's got it totally under control and is getting medication for it and they know they've got a history of depression and they have sought medical treatment for it.

"She had no, absolutely no, thoughts of self-harm or anything at all like that."

When Ms Smith died two years later from breast cancer, Mr Smith was unable to claim the hundreds of thousands of dollars her insurance would have left him.

Mr Smith's comments came as a legal action began in Victoria today which could test whether it is discriminatory for insurance companies to reject coverage for cases of mental illness.

"When Ms Smith died two years later from breast cancer, Mr Smith was unable to claim the hundreds of thousands of dollars her insurance would have left him." (Image via iStock)

Ella Ingram is challenging QBE after she was denied a claim on her travel insurance four years ago.

On doctor's advice, she cancelled a planned overseas trip because of severe depression but QBE refused to pay out, claiming that mental illness was excluded.

"I've had an incredible response, online, getting text messages from people I haven't spoken to in years, saying I know people who have had a similar situation to mine," she told 7.30.

"I think it started the conversation that needed to happen."

Alan Kirkland, chief executive of the consumer watchdog Choice, said people are often caught out by the fine print in insurance policies.

"We see people bewildered for a range of reasons. People who find that mental health cover is excluded in general when they know they've got a pre-existing condition, or it might be that they have to pay more because they didn't disclose a pre-existing condition," he told 7.30.

"Or the really terrible ones we see is where somebody has a first time mental illness while travelling, so they haven't disclosed it, they haven't realised that there was an exclusion and then when something happens they end up tens of thousands of dollars out of pocket."

But Mr Kirkland cautioned against not being upfront with the insurance companies.

"The best advice is to be really honest with your insurer," he said.

"Assume they will see all you medical records and disclose any medical conditions.

"And in terms of the fine print, look really carefully for any exclusions that relates to anything you might have asked a doctor about in the past and then shop around because there are different practices across the insurance industry.

"They're not all the same you might be able to find an insurer that covers you for something that another one doesn't."

Legally, insurers can refuse coverage if they have statistics to back it up but that does not mean they can unreasonably apply blanket exclusions — and that is what Ms Ingram's case will test.

"Now people know that it is an issue and people aren't alone, and that's exactly what I was hoping for," she said.

QBE is vigorously defending the action, arguing coverage in such cases would be financially unviable.

Either way, Mr Kirkland thinks that some legal clarity is a good thing.

"It's great to see these matters going through the courts because what we need is much clearer statements," he said.

"And what we need is those who are breaking the law made an example of and they should be named and shamed."

This post originally appeared on ABC News.

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