Can you lie on a life insurance application?
You’ve reached the moment in your life when you realize that you need life insurance. You’ve done your homework. You’ve compared life insurance quotes, and maybe settled on a life insurance company. You’re all set to fill out the question form, when you come across a question that gives you cause to pause.
Maybe it’s about your medical history, maybe it’s if you smoke or not. As you study the questions, you consider: What if I just…lie? What if I say I don’t smoke when I do? I mean, I intend to quit one day…
While this might seem like a good idea today, a short-cut to save a few dollars on your policy, the long-term consequences can be devastating.
What Is Life Insurance Fraud?
Life Insurance Fraud can take many forms. From taking out a fake policy to putting in a false claim, there’s no shortage of ways people have tried to exploit insurance companies. While some of these are more extreme examples, there are other, less insidious forms of fraud. Lying about tobacco and drug use, personal and familial medical history, and your personal income all can constitute life insurance fraud.
You might be motivated to lie about certain facts in hopes of paying a lower premium or getting a less expensive policy. For instance, if you claim your yearly income is lower than it is, you could be granted a cheaper policy. Or let’s say you have a few DUI’s in your history. You might feel that disclosing this information would make you ineligible for certain policies.
While you might think you’re getting away with something by not disclosing all the facts, chances are your deception will be discovered, and you’ll pay the price.
When you apply for life insurance, your application is reviewed by an underwriter, who assesses your application based on certain criteria. They may require a medical history provided by your doctor. They may require you to submit blood and urine tests, or attend a third-party physician for a medical exam. The older you are, the more criteria will be examined by an underwriter in determining your eligibility.
With your insurance policy being held under such scrutiny, odds are good that your lies will be discovered.
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What Happens If Your Lies Are Discovered?
Let’s say you’ve gone ahead and lied on your life insurance application. What could possibly go wrong? The answer: a lot.
In a best-case scenario, your lie will be caught early, and you will have to pay the higher rates that you hoped to avoid. You might, however, see yourself denied the policy all together. This means you have to start a new application with another company, but that new company will know that you lied on a previous application, as this information is recorded on a centralized database. As a result, they could investigate you more, charge higher premiums, or deny you coverage. Despite how bad that sounds, it isn’t the worst case scenario.
If you do get approved for an insurance policy with your lies undetected, you might think you’ve gotten away scot-free. This couldn’t be further from reality. You could go your whole life with your deceitfulness being unnoticed, only to have the consequences come to the fore when it’s time for your policy to pay out.
When the insurance company reviews your coverage upon your death, they’ll consult medical reports and other documents as part of their process. If they find that you were misleading or lied on your application, in the best-case scenario, your next of kin could receive a reduced death benefit. In the worst-case scenario, your policy could be cancelled altogether.
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What if you make a mistake on an insurance application?
What if, when filling out your insurance application, you don’t know the answer to a question, so gave your best guess? Or what if you simply forget about minor surgery you had when you were younger? We all make mistakes.
If you encounter a question you don’t know the answer to on an insurance application, your best bet is to contact your agent and discuss the situation with them. Similarly, if at a future time you realize that you left something out of your application, or failed to give a complete answer, talk to your provider. They can adjust your information as appropriate, and you might find that there’s no consequence at all.
Honesty Is The Best (Life Insurance) Policy
Insurance is a business, and life insurance companies need to protect their bottom line. When it comes to making a payout that could cost hundreds of thousands of dollars, they want to ensure they aren’t being taken advantage of. They will do their due diligence in investigating your policy. While it might not happen at the time of application, you better believe they’ll be thorough when it comes time to pay out. It’s not worth taking the chance that your policy will be cancelled.
Honesty is always the best policy, a proverb that holds true when it comes to an insurance policy. So. it’s really not worth lying on a life insurance application. You might be surprised: something that you thought could affect your premiums, like a pre-existing medical condition, could have no effect at all.
Also read:
- How much life insurance do I need?
- 17 life insurance mistakes to avoid
- Life insurance for children
- What is life insurance fraud?