Truth and Consequences: What Happens if You Lie on a Life Insurance Application (2024)

When it comes to insurance policies, honesty is not only the best policy – it is the only policy. Lying on your life insurance application can lead to serious consequences, including policy cancellation, claim denial, or an inability to secure insurance elsewhere.

How Premiums Are Calculated

When you apply for a life insurance policy, you will be required to fill out a long application with details about your demographics, occupation, lifestyle, and personal and family medical histories. Based on the information you provide, the insurance company will calculate your premium using a complex formula that takes your age, gender, health, lifestyle choices and other risk factors into consideration. Generally speaking, older individuals with pre-existing health conditions will pay higher premiums.

What People Lie About

Lying on a life insurance application is fairly common, especially among older people and/or people with health issues who are looking to avoid paying a higher rate for insurance. Common items people lie about include age, weight, family or personal medical history, tobacco, alcohol or drug use, prescription medications, occupation or income, and mental health.

When a Lies Constitutes Fraud

On some occasions, giving a false answer is not deliberate. For instance, when providing your medical history, you may forget to list a medication that you took several years ago. To be considered fraud, the false statement must be intentional and it must be a “material misrepresentation,” which means the falsehood would have impacted the insurance company’s rate of coverage or its decision to issue coverage.

Verification Process

Insurance companies know that people lie on applications, so they will undertake a meticulous verification process before issuing coverage. This will likely include conducting a medical exam and reviewing your medical, prescription and motor vehicle records, among other documents. Insurance companies will compare your application against the records with a critical eye, looking for discrepancies that could indicate fraud.

Lies Detected During the Application Process

Depending on the severity of the lie or lies, the insurance company may immediately decline coverage if the discovery is made during the application process. Further, the incident will be logged into the Medical Information Bureau (MIB) database, which is accessible by other insurance companies. As life insurance companies routinely check the MIB before issuing a policy, having a history of lying on insurance applications will make it considerably more difficult and more expensive for you to obtain coverage elsewhere.

Lies Detected After Coverage Is Issued

Life insurance policies typically contain a two-year contestability period, in which the insurance company reserves the right to cancel coverage if material misrepresentation is discovered within that time frame. If you die and a claim is made during the contestability period, it is absolutely guaranteed that the insurance company will undertake a thorough investigation to ensure no fraud was committed during underwriting in an effort to void coverage and avoid paying the claim. The insurance company may cancel the policy entirely, with no payout made to your beneficiaries, even if the lie was unrelated to cause of death. Alternately, the insurer may calculate what the rate would have been if truthful information had been provided and subtract the difference in the premiums from the death benefit.

To avoid these potential consequences, fill out all insurance applications as truthfully and accurately as possible.

If your insurance application or claim has been denied or is being challenged on the basis of the insurance’s claim of application dishonesty, give us a call. We have the experience, creativity and tenacity to make sure insurance companies honor their contracts and keep the promises they made to policyholders like you.

If you have any questions concerning a bad faith case, or any other questions about insurance coverage, please contact us.

Truth and Consequences: What Happens if You Lie on a Life Insurance Application (1)

Evan S. Schwartz
Founder of Schwartz, Conroy & Hack
800-745-1755
ESS@schlawpc.com

Truth and Consequences: What Happens if You Lie on a Life Insurance Application (2024)

FAQs

Truth and Consequences: What Happens if You Lie on a Life Insurance Application? ›

Depending on the severity of the lie or lies, the insurance company may immediately decline coverage if the discovery is made during the application process. Further, the incident will be logged into the Medical Information Bureau (MIB) database, which is accessible by other insurance companies.

Can you get in trouble for lying on a life insurance application? ›

It may impact your future insurability, and the consequences may vary based on the severity of the omission. For instance, intentional fraud or forgery may be punishable in criminal court. If you are caught lying during the application process, the insurance company can immediately decline coverage.

What happens if you lie on a life insurance questionnaire? ›

What happens when you lie on a life insurance application. If it's during the application process, there is a good chance your application will be denied. And that denial information will be available, via database, for other insurers.

How does insurance know if you're lying? ›

At best, you will have to remember your lie the entire time you are dealing with your insurer. They will most likely record calls and other interactions with you to uncover any discrepancies in your claim. At worst, you could face criminal penalties leading to fines and even jail time.

What happens if you lie on an insurance claim? ›

If the insurer thinks you lied, they might deny the claim and cancel the policy. You could even face criminal charges for insurance fraud.

What happens if you lie about weight on life insurance? ›

Wrong or false information on your application for life insurance or medical questionnaire can invalidate your life insurance policy because the life insurance company can void the contract due to fraud.

What disqualifies a person from life insurance? ›

They can include engaging in risky hobbies and behaviors like skydiving; having a history of DUIs or speeding tickets; having a dangerous job like roofing; having a criminal record or a less than ideal financial history; being a smoker; and failing a drug test.

How far back do life insurance companies look? ›

When initially underwriting a life insurance policy, life insurance companies sometimes check up to 10 years of an applicant's medical records.

Do life insurance companies verify income? ›

Life insurance companies typically gather information on your finances, including your annual income and any history of bankruptcy.

What voids a life insurance claim? ›

Life insurance covers death due to natural causes, illness, and accidents. However, the insurance company can deny paying out your death benefit in certain circ*mstances, such as if you lie on your application, engage in risky behaviors, or fail to pay your premiums.

What happens if you lie about smoking on life insurance? ›

If you lie about your tobacco use and the provider finds out, then claims on your life insurance policy could be denied, which may put your loved ones in financial jeopardy. Lying to a life insurance provider about your tobacco use could also be seen as fraud, which might come with legal ramifications.

What is it called when you lie to an insurance company? ›

Background. Last Updated: 6/13/2023. Issue: Insurance fraud occurs when an insurance company, agent, adjuster or consumer commits a deliberate deception in order to obtain an illegitimate gain. It can occur during the process of buying, using, selling, or underwriting insurance.

What happens if you lie? ›

Lying has consequences. When someone finds out you have lied, it affects how that person deals with you forever. If your spouse lies, you may be able to work it out in therapy, but an employer is not likely to forgive. Even if you convince yourself a lie is OK, it still violates the dictates of conscience.

Do people lie on insurance applications? ›

The youngest U.S. adults, Gen Zers (ages 18-27), are most likely to say this — 42% say they've lied on an insurance application, compared to 28% of millennials (ages 28-43), 17% of Gen Xers (ages 44-59) and 6% of baby boomers (60-78).

Can insurance companies check your phone records? ›

Does a Car Insurance Company Have the Right to Request My Phone Records? It is possible for insurance companies to pursue this type of evidence. In nearly all situations, they will do so if they believe you could have been distracted while driving and that distraction is what caused or contributed to the accident.

What happens if I lie about what age I got my driver's license? ›

Sentencing and Punishment for Providing False Statements to the DMV. A violation of California Vehicle Code Section 20 is considered a misdemeanor crime under California Vehicle Code 40000.5 that carries the following punishments: Six months in county jail. A maximum of fine of $1,000.

How honest do you have to be for life insurance? ›

Whether you're applying for life insurance or critical illness insurance or any other kind of personal health insurance, being honest and transparent about your health is not just a matter of ethical responsibility—it's a vital component for securing the financial protection you and your loved ones need.

Can life insurance application be denied? ›

Financial Issues

Insurers may reject your life insurance application if there's reason to believe you can't afford the premiums. This might happen if you have a history of bankruptcy, lots of outstanding debt or a low income.

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