Truth and Consequences: What Happens if You Lie on a Life Insurance Application

Lying on a Life Insurance Application

When it comes to insurance policies, honesty is not only the best policy – it is the only policy. Lying on your life insurance application can lead to serious consequences, including policy cancellation, claim denial, or an inability to secure insurance elsewhere. 

How Premiums Are Calculated

When you apply for a life insurance policy, you will be required to fill out a long application with details about your demographics, occupation, lifestyle, and personal and family medical histories. Based on the information you provide, the insurance company will calculate your premium using a complex formula that takes your age, gender, health, lifestyle choices and other risk factors into consideration. Generally speaking, older individuals with pre-existing health conditions will pay higher premiums. 

What People Lie About

Lying on a life insurance application is fairly common, especially among older people and/or people with health issues who are looking to avoid paying a higher rate for insurance. Common items people lie about include age, weight, family or personal medical history, tobacco, alcohol or drug use, prescription medications, occupation or income, and mental health. 

When a Lies Constitutes Fraud

On some occasions, giving a false answer is not deliberate. For instance, when providing your medical history, you may forget to list a medication that you took several years ago. To be considered fraud, the false statement must be intentional and it must be a “material misrepresentation,” which means the falsehood would have impacted the insurance company’s rate of coverage or its decision to issue coverage. 

Verification Process

Insurance companies know that people lie on applications, so they will undertake a meticulous verification process before issuing coverage. This will likely include conducting a medical exam and reviewing your medical, prescription and motor vehicle records, among other documents. Insurance companies will compare your application against the records with a critical eye, looking for discrepancies that could indicate fraud. 

Lies Detected During the Application Process

Depending on the severity of the lie or lies, the insurance company may immediately decline coverage if the discovery is made during the application process. Further, the incident will be logged into the Medical Information Bureau (MIB) database, which is accessible by other insurance companies. As life insurance companies routinely check the MIB before issuing a policy, having a history of lying on insurance applications will make it considerably more difficult and more expensive for you to obtain coverage elsewhere. 

Lies Detected After Coverage Is Issued

Life insurance policies typically contain a two-year contestability period, in which the insurance company reserves the right to cancel coverage if material misrepresentation is discovered within that time frame. If you die and a claim is made during the contestability period, it is absolutely guaranteed that the insurance company will undertake a thorough investigation to ensure no fraud was committed during underwriting in an effort to void coverage and avoid paying the claim. The insurance company may cancel the policy entirely, with no payout made to your beneficiaries, even if the lie was unrelated to cause of death. Alternately, the insurer may calculate what the rate would have been if truthful information had been provided and subtract the difference in the premiums from the death benefit. 

To avoid these potential consequences, fill out all insurance applications as truthfully and accurately as possible. 

If your insurance application or claim has been denied or is being challenged on the basis of the insurance’s claim of application dishonesty, give us a call. We have the experience, creativity and tenacity to make sure insurance companies honor their contracts and keep the promises they made to policyholders like you. 

If you have any questions concerning a bad faith case, or any other questions about insurance coverage, please contact us.


Evan S. Schwartz
Founder of Schwartz, Conroy & Hack