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  • Writer's pictureAhsan Malyk

What Happens If You Lie On Life Insurance Application?

When applying for life insurance, a person may have a number of reasons for not being totally honest. However, in most cases, the reasons come down to cost and coverage concerns.

For example, they want to pay a lesser premium or they are concerned that they won't be covered if they divulge specific facts, such as medical conditions or the fact that they smoke cigarettes. Other examples include alcoholism and drug addiction.

However, telling a lie to life insurance might cost you a significant amount of money. If the insurance company learns that you lied on your application, they have the right to refuse to pay out any claims.

If an insurer discovers that you have submitted incorrect information, it has the right to not only deny your application but also terminate your coverage.

Why do some people lie on their applications for life insurance?

It's not as often as you would imagine people lying on their applications for life insurance. 14.7% of respondents in the United States acknowledged providing false information on an insurance application.

The question, therefore, becomes: why do individuals mislead on applications for life insurance? The state of one's health is commonly used as a justification for lying. For instance, someone may tell an insurance company about their smoking history in order to get a cheaper premium on their health insurance.

Since they are taking on greater risk when they insure someone who engages in unhealthy behavior, life insurers typically charge higher premiums to tobacco users. It's also possible for someone to lie about a parent having heart disease or cancer

Among the other lies that might get you into problems with life insurance are the following:

● Creating a false impression of your financial situation in order to get a larger payout

● Being dishonest about drug usage

● Fabricating a conviction for driving under the influence of alcohol

● Keeping one's depression diagnosis a secret from one's loved ones

● Keeping a major sickness from being disclosed in the past

Repercussions for providing false information

If you provide false information on a life insurance application, you might face a variety of possible repercussions. They might be from very small to catastrophic ones. They are as follows:

● Being requested by the insurance company to make changes to the portion of the application that is being questioned and scrutinized

● Having the application turned down as unacceptable

● Being subjected to more expensive insurance rates

● Having the insurance coverage terminated

● A claim that ultimately results in compensation that is less than anticipated

A claim is turned down if, during the first two years (contestability period) after the insurance has been issued, it is revealed that fraudulent information was provided.

What happens when an insurance provider may find out you lied

During the underwriting process, when an insurer determines whether you are insurable and how much your coverage will cost, a lie told on an application may surface. It is also possible after a policy has been written, or after the policyholder has passed away their beneficiaries are seeking a payout.

Alternatively, the lie may come out after the policyholder has passed away and their beneficiaries are seeking a payout.

Before accepting someone's application for life insurance coverage, many life insurers require them to undergo a medical exam. This test has the potential to reveal any lies that were included in the application.

It is important to note that certain life insurers provide coverage without the need for medical exams.

Omitting information on the application or making false statements

When filling out an application, it is possible to tell a falsehood by missing facts or by embellishing the truth. If you accidentally lie on an application, it's possible that it won't be a major deal in the end.

However, if you knowingly lie on an application, the life insurance company can consider this to be fraudulent. Hence, it might end up rejecting your coverage as a result.

Omissions of fact that are not material normally do not have an effect on an application. In the same vein, providing inaccurate information, such as an incorrect address, shouldn't result in difficulty for the recipient.

However, if you provide a lower weight or age than you really are, your insurance coverage may be voided. Alternatively, the payment amount may be lowered, despite the fact that these are fairly innocuous details.

Falsifying information on the application

It is also possible for a severe deception stated on an application to be discovered after a policy has been issued. During the first two years of your policy, your life insurer has the right to challenge any of the information.

Later on, a falsehood that was told on the application might cause problems for a claim that was submitted by the beneficiaries of the insured.

If a policyholder had diabetes but failed to disclose that fact on their application, the insurance company has the right to refuse to pay out. In addition to this, the insurance company may initiate legal action against the policyholder's estate for fraud.

What should you do if your circumstances alter?

After purchasing life insurance, it is typical for your policy to stay unchanged. After acquiring the insurance, you shouldn't have to worry about your coverage being impacted if you decide to engage in potentially dangerous activities such as skydiving or start smoking cigarettes.

Why? Because the policy only considers your lifestyle characteristics at the time coverage is granted. It does not take into account any changes to your lifestyle that may occur in the future.

Take Away

'Honesty is the best policy,' as the old proverb goes, and you've undoubtedly heard this before. When it comes to completing the application for life insurance, this proverb is very applicable.

If you are truthful about all of your personal details, it will be easier for you to qualify for a policy. It will also increase the likelihood that your heirs will get a payment after your passing.

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