Life insurance premiums are primarily based on your age, health and lifestyle which means that older people and individuals with pre-existing health issues generally pay more for their insurance than young and healthy people. As with auto insurance or any other type of insurance, life insurance also takes into consideration individual characteristics and circumstances when coming up with an insurance quote.
You might be tempted to lie about your age or health risks to avoid a huge premium, but don’t even entertain the idea. Purposely lying on your life insurance application is fraud, and you’ll probably get caught. A number of things can happen when you lie on your life insurance application and get caught. This article will help you understand how insurers catch lies on applications and what could happen to you if you do get caught telling a lie.
Lying on a life insurance application
Lying on your life insurance application can be tempting to get a better quote. However, if you’re caught lying on your application, there are a number of consequences you can face.
Lying on your life insurance application is actually pretty common, especially among people who are older or have health problems. Here are a few of the common things that people lie about on their life insurance application:
- Age: Someone may lie about their age by saying they are younger.
- Weight: Someone who is obese may lie about their weight.
- Family medical history: Someone might say they don’t have a family history of cancer when their grandmother actually passed away from lymphoma
- Personal medical history: Someone might lie about a family history of disease or a past health issue.
- Tobacco use: Someone who occasionally smokes cigarettes may check the “non-smoker” box.
- Drug use: Someone who has used any type of drug may lie about their drug use.
- Mental health: Someone who has depression or another mental health issue may lie about their mental health.
But it’s not just health issues that people lie about. Some people lie about their income, their job, their prescriptions and more.
The main reason why people lie on their life insurance application is to avoid paying a huge rate. Someone who has pre-existing health issues, like cancer, diabetes or high blood pressure will pay a higher rate than someone who is perfectly healthy. Additionally, a 70 year old will usually pay less for their life insurance than an 80 year old, which is why some people lie about their age.
While you might think that lying on your life insurance application is no big deal, it will come back to haunt you. Insurance companies know that people lie on their application to get a better rate and so have underwriters meticulously check the background of every applicant to make sure they are being truthful on their application.
How insurance companies detect when you are lying
After you submit your life insurance application, the underwriter goes to work verifying your information. They look at the findings from your medical exam, review medical records from your doctors and even pull your driving history from the state’s DMV. Insurance companies know that people lie on their application, so they’re keeping a close eye out for discrepancies or conflicting information that might indicate fraud.
Insurance companies also use the Medical Information Bureau (MIB) when verifying life insurance applications. The MIB is a database that contains a profile on every individual who has submitted insurance applications in the past. If your MIB profile suggests that you’ve lied on insurance applications before, the insurance company will find out and can decline coverage because of your history.
You will not get approved for coverage if you lie on your application and get caught. If you somehow get away with lying on your insurance application and pass away within the first two years of coverage, your insurance company has the right to reevaluate your application. If they find out about the lie at that point, it can have consequences for your beneficiaries.
The consequences of lying on your life insurance application
Lying on your life insurance application is considered fraud, and it comes with serious consequences. However, the consequences vary based on the type of lie and the severity.
If you’re caught lying during the application process, the insurance company can immediately decline coverage. The incident will get logged in the MIB, which means other insurance companies will know about it. That means it will be much harder to get a life insurance policy from any other provider.
If the lie is relatively minor, you might be able to get approved for coverage, but you’ll pay a much higher rate than you would otherwise or have a lower coverage amount.
If you pass away within the first two years of the policy and the insurance company discovers the lie after your death, they can choose to cancel your coverage altogether. Either your beneficiaries would receive no death benefit, or they would get a much lower death benefit than what you were paying for because the insurance company would calculate how much coverage your premiums would have purchased if you’d been honest.
What if I make an honest mistake on my application?
Life insurance applications contain a lot of questions, and it will probably require you to think back on your medical history over the past few decades. It’s entirely possible that you could forget important information or resort to making some educated guesses. If that happens, it generally won’t impact your application.
Insurance fraud occurs when someone intentionally lies or reports incorrect information for their own benefit. If you have to guess your current weight, or you forgot about a medication you took 10 years ago, the insurance company won’t penalize you. However, it helps to get a copy of your past medical records before filling out the application to make the process easier.
Frequently asked questions
What do people lie about on their life insurance application?
People lie about almost everything on life insurance applications. It’s especially common for applicants to lie about their age, their income, their prescriptions, their current medical conditions, their family history of illness and their alcohol and drug use.
Can you go to jail for lying on your life insurance application?
If you lie on your life insurance application, you won’t get arrested or go to jail. However, the incident will get recorded in the MIB, which means other insurance companies will know that you lied while trying to get life insurance. Lying once on your life insurance application could make it very difficult to get coverage from another company.
Can I get life insurance if I have pre-existing health conditions?
Yes, you can get approved for life insurance coverage if you have health problems. For example, a guaranteed issue life insurance policy approves almost every applicant, regardless of their health history. You can also look into simplified issue life insurance, which only requires a written health questionnaire, rather than a physical medical exam.