What Happens if you lie on a Life Insurance Application?
Let’s be honest: When you’re applying for life insurance (and possibly worried your health might prevent you from finding an affordable policy) it’s tempting to fudge the facts a little to give yourself the best chance. But lying on an application can have nasty consequences and your chances of getting away with it are slim.
Because life insurance applications frequently have inaccuracies, underwriters have several ways to verify the information provided on applications. Memories are notoriously unreliable, so it’s true that a significant portion of the errors on life insurance applications is simply due to honest mistakes and lapses in memory.
It’s understandable to mix-up or just plain forget some details about your own medical history. That’s part of why every application goes through several steps to fact check the information provided. They look into your medical, financial, and daily life in order to discover more about you.
Assessing risk in life insurance
Why is lying such a big deal on a life insurance application, anyway? A life insurance provider is looking to carefully review your risk to accurately give you a reasonable premium. Most of the time when an applicant intentionally lies, they leave out some aspect of their lives — often, forgetting to mention the occasional of cigarette they smoke at parties or a health issue that’s no longer causing problems.
Other things applicants frequently lie about on life insurance applications include illegal drug use, mental illness, speeding tickets, DUIs, and personal or family cancer history. People also frequently leave out information about trips to foreign countries, and (in an effort to get approved for a larger insurance policy) sometimes applicants exaggerate their income.
Each of these factors is surprisingly easy to check on and insurance providers will do just that.
Verifying life insurance applications
Once you fill out and submit your application, the life insurance provider will check with the Medical Information Bureau to ensure all the information provided is correct. The MIB is a not-for-profit medical database that’s collectively owned by 430 insurance companies. That may seem like a strange idea, but the MIB has been operating since 1902 and provides a critical resource for insurers to process applications with higher accuracy.
Instead of tediously pulling all your medical records from individual providers, the MIB allows a secure way to share pertinent information without risking patient privacy. That’s because the MIB doesn’t store records directly, they use a coded system that keeps only some information about major medical issues.
Additionally, insurers typically look into other areas of applicants’ lives. This may include accessing information from health care providers, pharmacy databases, wearables, and even the DMV — DUIs and other infractions that point to a pattern of reckless behavior can factor into the underwriting process.
The medical exam
The medical exam might be the most dreaded part of the life insurance application process. Besides being an inconvenience, it can also feel like a test. But the exam’s purpose is primarily to expand on the information gathered from your application. The medical exam is a standard, required part of applying for term life insurance.
The medical exam is basically a simple physical. They’ll check your heart rate, breathing, and blood pressure, then they’ll likely take blood and urine samples. These are used to test for a variety of health conditions and factors including smoking habits, medications, any illicit drug use, etc. That’s it. All in all, the actual exam should only take a few minutes.
Possible consequences
If, during the application process, the provider discovers inaccuracies, there are a number of ways to proceed. The consequences of lying on an insurance application vary, but if you do your best to tell the truth, the insurer will likely be understanding.
If an applicant leaves out a health issue or doctor visit for the sake of attempting to get lower premiums, the insurer might simply revise the application and offer a higher rate that reflects the inclusion of the previously omitted health information. But if there are multiple errors in the application or the errors are more serious, the insurance provider might start an investigation. If, as a result of that investigation, a carrier discovers an undisclosed medical condition they may close your case and prevent you from applying again for two years.
The worst consequence of lying on a life insurance application, though, isn’t being declined. The worst possible outcome actually looks like a success at first. After death, if an insurer finds out an applicant lied, they may reduce or refuse the payout altogether —This generally only happens in cases where it becomes evident after death that the applicant overtly lied about a very serious health issue. That’s why it’s so important to be honest and detailed on your application.
If you’re worried about not qualifying for a life insurance policy, the best course of action is to contact Mira. We help applicants find the best policies for their particular circumstance. Because underwriters each calculate health issues differently, it’s impossible for applicants to know which policies are their best option. A knowledgeable agent can help you navigate the process.
