Lying on insurance? There are 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. Take the results of a survey of over 2,000 people conducted by Harris Poll for the personal finance site NerdWallet a few years ago. Eleven percent said it’s acceptable to lie about tobacco habits for lower life insurance rates.1

In addition, 16 percent said it was acceptable to lie about marijuana use to secure lower life insurance rates.

The survey was part of a general investigation into what kind of money lies are viewed as “acceptable” or “unacceptable” by the general U.S. population. The questions ranged from using someone else’s online account for movies or music (33 percent thought that was okay) to lying to the IRS about under-the-table income (24 percent). (Related: Life insurance tax advantages)

Generally, the survey found that older Americans, 65 and above, are less likely to find lying about money matters acceptable. Indeed, the survey found that only 11 percent of seniors believe it is acceptable to use someone else’s online account for movies or music, versus 39 percent for folks aged 18-64.

Another survey takeaway was that men are more likely than women to say financial lies are acceptable.

Indeed, on the life insurance and tobacco use question, men were more likely to say lying was acceptable (14 percent versus 7 percent for women).

The life insurance and tobacco use question was the least popular lie in the survey, which may reflect general knowledge that tobacco use will likely be discovered. Indeed, the blood test required for most life insurance policies typically reveals nicotine and other chemical evidence of smoking, be it tobacco or marijuana.

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?)

So lying now could cause problems 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.