The first thing you’re probably thinking is “why would anyone lie on a life insurance application?” And that’s a good question. On the surface, it seems silly to lie when getting a life insurance policy as it’s not the same as health insurance in that you need health insurance to cover health problems. The heart of the issue is the fact that life insurance sometimes requires a physical exam from the applicant to get certain kinds of policies, and those with less-than-perfect health may spend more money on a policy.
It’s enough to make someone decide they have to lie in order to get a policy when it’s far better to be in good health and physical condition before getting a policy. And if someone is in good shape, they’re far more likely to save on a policy through an insurer like Health IQ. It’s proven science that good health equals longevity, and when it comes to life insurance policies, that good health is rewarded through lower premiums. Read on to learn more about what happens when people lie on their life insurance application.
Defining a Lie
Lying on an application involves covering up a condition that existed at the time of applying. Sometimes it’s intentional; sometimes it’s unintentional because the applicant didn’t think it was necessary to include the condition. Even then, the non-admitted condition may not be enough to get the policy canceled. The carrier may decide that the condition isn’t life-threatening or isn’t going to cause a premature death and continue the coverage once the condition was revealed. However, hiding a serious condition is almost certainly grounds for punishment.
Someone who has, or previously had, cancer and obtains a life insurance policy without disclosing this fact is considered someone who is committing fraud. However, there is an extenuating circumstance that allows for a claim to be paid out. That is, the condition wasn’t known, or it developed after the application was made. Insurers do recognize that there are some health problems that can become known long after the insurance policy was granted. The beneficiary of the insured still gets the benefits when the insured passes.
Unintentional lies due to forgetfulness or not comprehending the relevance of a prior condition and not entering it onto the application are not necessarily reasons for cancellation or lowered payout. Insurers recognize that sometimes an applicant makes a mistake and they don’t punish for those.
Understanding the Contestability Period
The contestability period is a timeframe that insurance companies have to investigate claims for approval or denial. It ranges from one to two years depending on state law. For example: if someone lies on a life insurance policy, such as saying they’re in excellent health only to die from a disease that they were concealing, the insurance company can investigate the claim for benefits. In the event that the insurer finds out that the insured was lying about their health, the insurer can lower or deny the claim of the beneficiaries. And the money the decedent paid to the company is not refunded.
If the insured has lied on the policy and gotten past the contestability period but passes away, the insurer still has the option to investigate the claim. The purpose of the contestability period is to give insurers the ability to protect themselves against clients who are looking for a cheaper policy because they know they have a life-threatening illness and are likely to be denied if they’re honest.
What is an Attempt to Defraud?
The strict legal definition of an attempt to defraud is making a false insurance claim to gain compensation or benefits that the individual is not entitled to. If someone knowingly lies when filling out a life insurance application, they are attempting to defraud the insurance company of money in the event of the claimants passing.
The applicant has any number of reasons to lie about their personal health, but they only wind up harming themselves or their beneficiaries when the applicant passes from the health condition.
What Happens if the Insurer Finds out About the Lies?
There are several actions an insurer can take in response to the applicant lying. The most extreme options are to cancel the policy entirely, raise premiums to compensate for the poor health of the insured, or refuse to pay out the benefits in part or whole. Sometimes the insurer decides to lower the benefit by the amount that would have been paid had the insured been honest about their health condition in the first place.
Simply put, don’t lie on a life insurance application. This only hurts the beneficiaries in the long run. Making the decision to get into the best shape of your life means that you’re a likely candidate for a life insurance policy from Health IQ. Health IQ rewards healthy people with affordable life insurance policies that reflect their dedication to excellent health.