Lying on your life insurance application will cause you more problems than it is worth. All of your statements will be scrutinized and even if the lies are not caught they will be grounds to cancel the policy.

First it is important to distinguish between warranties and representations. A warranty is something that you, the applicant, guarantees to be true. A representation is something that you believe to be true. Lying about a warranty will likely revoke the contract. If a representation proves to be untrue the insurance company may cancel the contract only if the representation was used to determine acceptance on the application.

What this means is that if you claim that you have no heart problems on your application when you have just returned from the hospital for double bypass surgery the insurance company will cancel the contract. If you claim that you have no heart problems on the application and two weeks later go to the hospital where it is found, completely unknown to you, that your heart is 50% blocked the insurance company does not have the grounds to void the contract.

Simply put, if you know about the problem and lie the insurance company will void the contract.

The insurance company, upon taking the application, will probably consult the Medical Information Bureau. The MIB is financed by insurance companies for the sole purpose of maintaining a database of the pre-existing conditions of potential clients uncovered by these same insurance companies. If you have been denied by an insurance company for health reasons it will do you no good to apply somewhere else and deny the medical problem.

Now, what happens if you lie on the application and the insurance company does not catch it?

The insurance company has two years to discover the lie and cancel the policy. They will then refund any premiums and void the policy.

What happens if you die before the insurance company catches the lie?

The insurance company will perform an investigation before paying the death benefit, including an autopsy, and if they find that the insured lied about a material fact, ANY material fact (even if it had nothing to do with the cause of death) the contract will be voided and all the paid premiums returned to the estate of the deceased.

It simply is not worth lying on an insurance application. Insurance companies have many resources at their disposal and will uncover the lie. Your policy will be denied/voided and your premiums returned.

Learn more about this author, Daniel Xiao Wang.
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