Lying on your life insurance application on purpose is considered fraud — also known as “material misrepresentation.” Simply mis-remembering a date, guessing at your weight, or forgetting a diagnosis doesn’t mean you’re committing insurance fraud.
But if you try to intentionally deceive a life insurance company, you could face serious consequences. The insurer could cancel your application, you could make yourself uninsurable with other companies, and ultimately, you could leave your family without the financial protection they need when you’re gone.
Read more about what constitutes insurance fraud
Why would you lie on a life insurance application?
People lie on life insurance applications to get better life insurance options. Generally, there are three motives for lying on a life insurance application:
To get more life insurance: The amount of life insurance you can apply for is based on your age and income. If you say your income level is higher than it actually is, it’ll raise the ceiling on how much insurance you can get.
To get cheaper life insurance: The more the insurer thinks you’re a mortality risk, the more expensive your life insurance will be. Many people omit or downplay information they share on a life insurance application, in an effort to get cheaper rates. This is especially true when it comes to people’s health histories.
To get approved: Certain aspects of your health and lifestyle can disqualify you from getting life insurance at all, like having a recent felony conviction or participating in a hazardous activity like bungee jumping. If you share facts like these when you apply, you may not be able to get a policy right away, but omitting them could have greater consequences, like being charged with fraud.
How do lies on life insurance applications get caught?
Not only is lying on your insurance application considered fraud, but it’s also almost impossible to get away with it. That’s because the insurer will verify all of the information you provide.
Insurers evaluate a wide array of sources to assess the risk of insuring you and determine your premiums. This includes:
Your motor vehicle report
Your prescription history
Results of the life insurance medical exam
Statements and records from your doctors
Your profile on the Medical Information Bureau (MIB).
Any inconsistencies on your application will likely become exposed through these documents. For instance, if you say that you don’t smoke, but your blood and urine results reveal byproducts of nicotine, then the insurance company will know you lied.
Likewise, if you say that you’re not taking any medications even if you are, your prescription check will reveal the truth.
What happens if your lie is caught during the application process?
If you’re caught lying while you’re still in the application process, your application could be rejected. That rejection would also likely be logged in your MIB report, the clearinghouse used by life insurance companies to discourage fraud.
Insurers check the MIB when evaluating your application, so if you tried to apply with a different insurance company, the insurer will be alerted that you’d lied on a previous application. This could be enough for it to decline your application.
It’s also possible, depending on the severity of the lie, that the insurance company will grant you a policy at a higher rate.
If you merely forgot to disclose a medical condition or prescription, your final rates will take into account your corrected information, which will probably result in a more expensive rate.
What happens if your lie isn’t caught during the application process?
If your lie somehow makes it through the application process and you’re able to get an active policy, there’s still a chance the insurance company could find out.
Every major life insurance company has a two-year contestability period. The contestability period holds that if you die during that time window, the company reserves the right to re-evaluate your application for any inconsistencies.
If at that point the insurer finds out that you lied, it could cancel your coverage, meaning that your beneficiaries wouldn’t get the money from your insurance policy that you intended for them.
Generally speaking, you shouldn’t lie on your life insurance application because it’s a form of fraud and will likely have negative consequences for you and your loved ones. One of the main reasons to get a life insurance policy is to have peace of mind, knowing your family will be financially supported if you die. Lying on your application puts that assurance in jeopardy.
More about the life insurance application process
Why do life insurance companies need my Social Security number?
Everything you need to know about the life insurance medical exam
Why does a life insurer need an attending physician statement (APS)?
What is a modified life insurance offer or approved other than applied?
Buying life insurance & disability insurance at the same time
Frequently asked questions
What happens if you lie on your life insurance application?
Three things could happen if you lie on your application:
Your application can be rejected and other companies may also refuse to work with you.
Your application can be approved at a more expensive rate.
Your policy could get approved and then not honored after your death if you die during the contestability period.
Do insurance companies treat intentional lies differently than accidental misrepresentations?
Yes. An intentional lie is considered fraud and has serious consequences. An accidental lie can be corrected without penalty, although if the new information increases your risk, you could pay more for your life insurance policy.
Is it common for an insurer to not pay out during the contestability period?
No. The insurers verify the information you provide, so it’s extremely rare that you’d be approved for a policy based on incorrect information. And it’s even rarer that the insurer would deny a payout during the contestability period, but it can and does happen.
It’s important for you to be honest when you apply so you can be assured that your loved ones won’t have any trouble making a claim on your policy if they need to.
