Insurers will no longer be able to refuse a claim where they have failed to ask the right questions, under government plans.
In some cases, insurers reject complaints where a consumer has not declared a fact completely irrelevant to the claim because it simply was not asked for.
The news is a massive victory for MoneySavingExpert.com and many other consumer groups.
Figures including this site's founder Martin Lewis and a director of lobby group Which? signed a letter last year urging the Government to implement Law Commission proposals to loosen rules on what consumers must declare, which are over 100 years old.
The letter cited the example of a woman denied a critical illness payout for leukaemia following a failure to declare unrelated ear infections.
Insurance application forms often only state deep in the small print that criminal convictions and unrelated medical conditions must be declared.
The Consumer Insurance (Disclosure and Representations) Bill, introduced into Parliament on this week, which contains the plans, is likely to become law in 2013.
Martin Lewis, MoneySavingExpert.com creator, says: "It's good to see the system working for once with a piece of non-contentious legislation being enacted that'll help huge numbers, even though it may not make huge headlines.
"The ridiculously antiquated insurance laws needed an urgent update as a few less scrupulous players in the insurance market have used the current laws as a get out of jail free card."
Professor Hector MacQueen, the commissioner leading the project at the Scottish Law Commission, says: "We are delighted to see this Bill introduced into Parliament. As the law stands, consumers are expected to predict what information an insurer might consider relevant.
"Under the reforms, the rights, duties and expectations of both parties are clearly established."
The Association of British Insurers, which represents insurance companies, insists most of its members already adopt less onerous disclosure requirements.
A spokesman says: "The insurance industry is committed to ensuring customers understand their rights and obligations, and have their genuine claims paid quickly. The Commission's proposals give legal status to existing best practices."