What happens if you lie on your life insurance application
Because life insurance premiums are primarily determined by your age, medical history, and lifestyle, older people or those with pre-existing health conditions typically pay more for their insurance than young and healthy people. Because life insurance is priced based on your individual rating factors, it may be tempting to withhold health information or make false statements. However, lying on life insurance applications can have serious consequences, such as disqualification from coverage or non-payment of death benefits to your survivors. Insurance companies use a variety of methods to verify information, so it's critical to understand the implications of your responses.
Lying on a life insurance application
Falsifying information on your life insurance application may appear to be a harmless way to obtain a lower rate. If you are caught lying on your application, you may face a number of consequences, including being charged with insurance fraud, which may lead to criminal charges.
Unfortunately, lying on a life insurance application is not uncommon, particularly among the elderly or those with chronic health problems. Here are a few examples of common false claims on applications:
- Age: Someone may claim to be younger than they are.
- Weight: An obese person may report a lower weight than is accurate.
- Family medical history: Even if a parent or sibling has recently battled cancer, someone may fail to share a family history of a critical condition or disease.
- Personal medical history: A person may leave out information about a significant past health issue.
- Tobacco use: Someone who smokes cigarettes on occasion may check the "non-smoker" box on purpose.
- Drug abuse: Someone who has abused a drug may refuse to admit it.
- Mental health: Someone suffering from depression or another clinical mental health issue may choose to withhold information about their mental health history.
Misinformation about income, occupation, international travel to war zones, prescriptions, and other health or lifestyle circumstances are also common.
To avoid paying a higher premium, people often lie on their life insurance application. Someone with significant pre-existing health conditions, such as cancer, diabetes, or high blood pressure, will almost certainly pay more than someone in good health. Furthermore, a 50-year-old will typically pay less for life insurance than a 60-year-old, which may tempt some people to lie about their age. Regardless of the possibility of a higher premium, the best course of action is to answer life insurance application questions truthfully in order to avoid policy denial or cancellation during the contestability period.
If you're concerned about paying a higher rate because of your health, you can compare multiple life insurance policy types to get the coverage you need at a price you can afford.
How insurance companies verify your life insurance application
The underwriter begins the verification process after you submit your life insurance application. They evaluate the results of your underwriting medical exam or health questionnaire, review your medical records, and may even conduct personal interviews with friends and family. Because insurers work with multiple forms of documentation, any discrepancies between your application and your medical files are likely to be discovered.
When verifying life insurance applications, life insurance companies also use information from the MIB. The MIB maintains a database that includes a profile of every person who has previously applied for health or life insurance. If there is any information in the database about false statements or misrepresentations, approval for a future life insurance policy may be denied.
Consequences of lying on your life insurance application
Lying on your life insurance application is a type of insurance fraud that can have serious consequences and affect your future insurability. However, depending on the gravity of the omission, the consequences may vary.
If you are caught lying during the application process, the insurance company may refuse you coverage right away. The incident may be recorded in the MIB, which means that other life insurers may see it if you apply for coverage in the future. If this information is flagged in your file, it may be more difficult, if not impossible, to obtain a life insurance policy from another carrier.
If the lie is minor, you may be able to get approved for coverage, but you may have to pay a higher rate than you would otherwise or face coverage limitations.
If you die within the first two years of receiving the policy and the insurance company discovers false statements on your application, your beneficiaries may not receive the full death benefit or may be denied completely. The contestability period is the period during which insurers may still investigate statements on the application to determine whether misrepresentations were made. From the time your policy goes into effect, there is usually a two-year contestability period during which your beneficiaries' death benefit can be denied or reduced if the life insurer discovers misinformation on the application. To calculate the death benefit your beneficiaries are eligible for, the insurer would typically calculate how much coverage your premiums would have purchased during the contestability period if you had answered the questions truthfully.
What if I make an honest mistake on my application?
Life insurance applications contain numerous questions, and completing the process will almost certainly necessitate a review of your medical history spanning several decades. It is entirely possible that you will forget vital information or will have to rely on educated guesses. If this occurs, it should have no effect on your application or future coverage.
Insurance fraud occurs when someone purposefully lies or reports false information for their own benefit. The life insurer is unlikely to penalize you if you have to guess your current weight or forget about a medication you took ten years ago. However, it is beneficial to obtain a copy of your previous medical records before completing the application to ensure that your information is as accurate as possible.