The Consequences of Lying on a Life Insurance Application

Lying on your life insurance application is not a good idea. If you’re worried about approval or high rates and want to get more affordable coverage for your family, glossing over medical or personal history details may seem harmless. Still, it can have some very negative consequences.

Aside from the apparent reason that it’s not the right thing to do, let’s explore three reasons why you shouldn’t omit information or lie on your life insurance application.

Your Application May Be Denied

When you apply for life insurance, your application goes through a process called underwriting. Basically, this process is an in-depth evaluation of your health, financial, and personal backgrounds to determine the level of risk you pose to the carrier.

Insurance companies have a wealth of resources that make it possible to confirm the information on your application. The three most important are as follows:

• The Medical Information Bureau (MIB) – a secure exchange of medical and non-medical information for fraud detection purposes pulled directly from previous life and health applications you’ve submitted. You authorize this exchange.
• Your medical records – when you apply for life insurance, you sign a medical records release authorization permitting insurance companies to pull your records and review your medical history.
• Your driving records – insurance companies often pull motor vehicle reports to review possible DUI incidences or other risky driving behaviors.

You may be declined outright if the carrier discovers excessive lies or omissions. Moreover, the facts they uncover could deem you uninsurable, and they reject you anyway.

You May Be Charged Higher Term Life Insurance Premiums

Because insurance companies have access to so much data, it’s tough to sneak falsehoods past them. However, you won’t always be declined coverage if you lie on your application. Even if you are approved for coverage after an attempt at deceit, your premiums will be much higher. 

If you used incorrect information to compare term life quotes before applying for coverage, your final rates wouldn’t reflect those initial quotes.

Your Family’s Death Benefit Claim May Be Reduced or Rejected

Just because you are approved for coverage after lying on your application doesn’t mean you’re out of the woods yet. You may not live to see the consequences of lying on your application, but your loved ones will when they don’t get the payout they were expecting.

How is this possible? Term life insurance policies have a contestability period that usually spans the first two years of the policy.

If you pass away before your policy is two years old, the carrier can investigate. If they discover you’ve misrepresented or omitted pivotal information, the carrier has the right to reduce your death benefit amount or even deny your beneficiary’s claim altogether. 

After the contestability period has passed, the insurance company no longer has the right to investigate claims unless you committed fraud.

Lying on your application for a chance at a lower premium just isn’t worth the risk. It puts your family at unnecessary risk—and isn’t protecting your family the reason you wanted to get life insurance in the first place?

There’s never a good reason to be dishonest on your life insurance application. Still, it’s common to be concerned that your health history or lifestyle may make your term life insurance premiums too expensive for your budget.

Quotacy is a life insurance broker. We work with over 25 of the nation’s top-rated life insurance companies to ensure you get the best policy at the best price. Our agents don’t work for commission, so you can trust they have your best interest in mind.

Being honest on your life insurance application ensures your agent has all the right information to set appropriate expectations. This also allows them to match you with the insurance company that will be most lenient with any risk factors you may have that could impact life insurance rates.

At Quotacy, we believe everyone who needs life insurance should have it, which is why we help people across the health and lifestyle spectrum get affordable coverage. Whether you take medication to treat depression, have a history of DUIs, or participate in risky hobbies like rock climbing, we can help.