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What Happens If You Lie On A Life Insurance Application?
The answer: it depends on the intent.
We know some people lie on life insurance applications, hoping to obtain a better premium and health classification. The funny thing is, insurance companies have ways of figuring out if the application information coincides with your real situation. They can find out from the following information:
- the Medical Information Bureau
- a prescription drug check
- your motor vehicle records
- your physician medical records
If something on the above doesn’t jive with the information on the insurance application, most likely your application will be delayed until more information is received. Depending on the situation, that can take additional weeks or months. Consequently, if the omitted information is material in nature, your insurance could be declined.
If You Slip Through Underwriting And Issued A Policy
If you are able to pass through the underwriting and deliberately lie on your application by omitting material information, the insurance carrier will issue a policy. But, it you are caught, your policy can become void. How? All life insurance contracts contain a two-year contestability period in which an insurance company can rescind and void the life insurance. For example, let’s say you don’t tell the insurance company you smoke, but then in a few months you develop stage IV cancer and then you die. Most likely, the insurance company will open up an investigation and find out that you were a smoker, but did not disclose that material information. When that happens, the insurance company probably won’t pay the death benefit. Instead, it may just refund the premiums to your beneficiaries.
We understand there can be “gray area” questions. Some questions, you can say “yes and no”. Insurance companies understand this. As long as there was no intent to defraud and no misstatement of material fact, then you should be fine.
If there is a misstatement of age, that in itself usually does not warrant a policy termination. Therefore, the carrier will most likely adjust premiums or the death benefit.
What’s the best way to avoid all of this? Follow the old saying: honesty is the best policy. Be completely honest and open on your life insurance application answers and medical history. We know that nearly everyone has a health complication here and there. Some more than others. Even most of the agents at My Family Life Insurance have a health complication or two. Did you know about 5% of applicants actually receive the very best health rating class? So, don’t despair and try to lie your way through the application.
If you have any questions regarding any health complications or would like to know your health classification in more detail, feel free to call, text, or email us. We would be happy to speak with you.