What happens if you lie on life insurance application? | MassMutual

Lying on a life insurance application: The consequences

Allen Wastler

By Allen Wastler
Allen Wastler is a former financial journalist with over 30-years of experience, including time at CNBC, CNN, and Knight-Ridder Newspapers.
Posted on May 5, 2020

Should you lie on life insurance applications? Obviously, we’re going to tell you “no.” Some people will still try, but be warned that there are consequences when you are found out. And what seems like a little lie now can end up costing your family a lot.

Sure, people stretch the truth. Indeed, about one in five people are likely to lie on a life insurance application, according to the Insurance Information Institute.

And what are the most common lies on life insurance? Usually, ones related to health. That’s because the cost of life insurance is tied to the health of the insured. As a rule, the healthier the applicant, the lower the rate will be.

As a result, people are sometimes tempted to lie on a life insurance application about their own health habits and history.

Typical areas include:

  • Tobacco use
  • Alcohol abuse or drug addiction
  • Family health history
  • Obesity or weight issues
  • Mental health
  • Major disease or condition (ranging from cancer to hypertension)

Additionally, some types of occupations, hobbies, or lifestyles can also factor into a life insurance underwriting situation. So, sometimes, there is a temptation for some people to fib there too.

The problem with lying about such factors is that, frankly, you are highly likely to be found out.

How?

Well, for many kinds of permanent insurance, a medical review and blood test are required. And such examinations can — and often do — reveal prevarication in these areas.

What about cases where you don’t have to take a medical test, which is often the case with online applications for term insurance?

In this day and age of networks and databases, chances are a lie will be uncovered there, too. Yes, much medical information is covered by strict privacy laws and restrictions. But other kinds of information — be it driving records to pharmacy purchases to work records — may be available for a life insurance company to doublecheck answers.

A ticket for DUI, for instance, could be a red flag about alcohol use. Similarly, passport records about travel to dangerous countries may belie assertions about a mundane home life.

And information on previous applications, even those with other insurers, may be available to cross check for consistency on health claims.

So, a lie on a life insurance application will likely be found out. Then what happens?

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. (If it’s a minor issue or honest mistake, you could still get a policy, but probably at a higher rate.)

And, even if someone succeeds in getting a policy despite a lie, there are consequences after the fact. After all, a death can bring a fair amount of examination and a coroner’s report. An undisclosed lifelong medical condition would be discovered.

And most insurance policies have provisions for reducing or sometimes even eliminating payouts when fraud is detected. Typically, if a life insurance company finds out that you lied about smoking, the payout to your beneficiaries would be reduced by the difference between the rate you paid and the smoking rate you should have paid. That could really alter the protection you planned for your family. (Calculator: How much insurance do I need?)

“An applicant for life insurance must with full intent be honest and truthful on their application,” said Jeffrey R. Rotman, a wealth management advisor at Rotman and Associates in Boca Raton, Florida. “Life insurance companies disclose the fact that any misrepresentation of any facts regarding health and personal information could amount to fraud. Furthermore, outside of legal repercussions, it simply does not make sense to be untruthful and/or stray into a grey area of only the possibility of a paid claim. The premiums over time would have been appropriated to a future death benefit that potentially could be denied, with significant repercussions to the stated beneficiaries.”

So, lying to a life insurance company now could cause problems and have consequences for your family and loved ones later. And isn’t one of the major points of life insurance to ease things for your family at what is likely a very difficult time?

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1NerdWallet, ” Survey: Men, Students, Parents Among Those Most Likely to Say Money Lies Are OK,” March 15, 2016.

The information provided is not written or intended as specific tax or legal advice. MassMutual, its employees and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of Massachusetts Mutual Life Insurance Company.