You’ve finally realized that you need life insurance. So you do your research and compare insurance quotes from a range of insurance providers, in search of the best coverage and premium in town.
After getting the best match, your eyes quickly scan your life insurance application form. You pause at the question that asks: Are you a smoker?
You ponder the question: I can get a lower premium as a non-smoker. So what if I just lie? I’m planning to quit smoking soon anyway.
Bury that thought. Lying on your life insurance application is a fraud that comes with a hefty price.
What is ‘insurance fraud’?
It helps to first understand what insurance fraud means. It’s an intentional deception or dishonesty on the part of either the buyer (insured party) or seller (insurance provider or insurance agent) of an insurance policy, for unjustified financial gain. If the buyer or seller deceives the other party, this will deem the policy that they enter into invalid.
For insurance buyers, one of the most common frauds that you must stay away from is application fraud.
What is ‘application fraud’?
When you knowingly withhold information or plainly speaking, lie on your life insurance application, that’s application fraud.
For instance, on your life insurance application, you claimed that you’re a non-smoker. However, your medical reports reveal otherwise. You’re actually a smoker and have in fact been smoking long before you applied for your life insurance.
What happens if you lie on your life insurance application?
Lying on your insurance application can land you in big trouble when your secret is out in the open. These are some of the serious consequences of lying on your life insurance application.
1. Your life insurance application may be denied
When filling in your life insurance application, you may think that it’s safe to lie. There’s a chance that your insurance provider won’t find out about it. But don’t be mistaken.
Insurance providers have extensive resources that allow them to verify the information that you submit to them. Among other resources, they can access your medical records. When you apply for life insurance, you also sign a medical records release authorization. This authorization permits your insurance provider to access and review your medical records.
Say that you declare you’re a non-smoker (when you’re actually a smoker), be rest assured that your insurance provider will sooner or later find out about it and penalize you by denying your application. In this case, you may have to start from scratch and get fresh insurance from another provider if you’re qualified.
2. You may be charged a higher life insurance premium
Most applicants lie on their insurance applications in a bid to get a lower premium. For instance, declaring that you’re a non-smoker can get you a lower premium based on the risk assessment done by the insurance underwriter. Sure, you can enjoy a lower premium now, but what if your insurance provider finds out that you lied on your application?
The worst-case scenario is your policy will be deemed invalid, which means you won’t get a cent out of your insurance that you’ve been paying for years.
The best-case scenario is you may still be approved for coverage but would be charged a higher premium.
In any case, lying on your application is not worth taking as you could lose all your hard-earned money spent on your insurance as soon as your insurance provider finds out about your fraud.
3. Your death benefit may be reduced or denied
You pay for your life insurance so that your dependents would be financially protected even after you’re no longer around. Imagine how devastating it would be for your dependents to learn that they can’t get any cash payout from your insurance because you lied on your application.
Understand that every life insurance policy comes with a ‘contestability period’ of usually one to two years after your policy is active. During this period, your insurance provider is allowed to review your policy and coverage.
Say that you pass away during this period; your insurance provider has the right to investigate. Should they find out that you lied on your life insurance application, they have valid grounds to either reduce or completely deny the cash payout to your beneficiaries. Surely, you won’t want any of these to happen to your beneficiaries, right?
You don’t have to lie on your life insurance application to get a lower premium
Whether it’s lying about tobacco use, medical history, or your occupation, don’t ever attempt to lie on your life insurance application.
There’s a legitimate way to get a lower insurance premium. At Bjak, you can get an all-in-one life and medical insurance policy that won’t hurt your wallet. Customize your policy to nicely fit your budget and needs here: https://bjak.com/life/en/
(Sources: Insuranceopedia, PolicyMe, ratehub.ca, RinggitPlus)
