What Are The Consequences Of Lying On A Life Insurance Proposal?

An individual has to fill out an application with the insurance company before receiving a life insurance policy. The applicant is required to disclose details about his/her money, health, and job, among other things. The insurer uses these facts to assess how much of a risk each individual poses. It may feel tempting to hide important details or even lie on the proposal form in order to build a more favourable picture of the candidate. It is, nonetheless, critical to be truthful. If it is discovered that a candidate lied on the application, he or she may face harsh consequences. Let us briefly examine the meaning and importance of the proposal form before we look at the outcome of lying on the application.

What is a Life Insurance Proposal Form?

A proposal form is a legal document that the applicant must submit for the insurance company to truly understand the applicant. The form asks the applicant for all necessary information that will help the insurer in underwriting. The proposal form for life insurance will ask for information such as age, income, and occupation. The premiums payable are determined by age, while the amount of coverage that can be extended is determined by income. The form will also ask for nominee information, which is necessary to ensure that the benefit reaches the right parties.

How Does the Insurer Know If You Are Lying?

The underwriter begins the verification procedure when you submit your life insurance application. They evaluate the results of your underwriting medical exam, examine your medical records, and even obtain your driving record from the state's motor vehicle agency. Since life insurers are aware that people lie on their applications, they keep a tight eye on any anomalies or conflicting information that could indicate fraud.

What Are The Consequences Of Lying On A Life Insurance Proposal?

Here are some scenarios that could occur if and when the life assured is discovered lying on the proposal form.

• Revise the Premium Amount - If an individual withholds medical information in order to obtain lower premiums and the company discovers this, the premium may be revised to reflect the inclusion of the previously omitted health information.
• Ban the Applicant from Reapplying for a Plan - The insurer may launch an investigation if multiple inconsistencies are discovered and if the errors are more serious. If the employer discovers a concealed medical problem during the investigation, it may close the case and ban the individual from applying again for a period of time.
• Claim Denial - The worst consequence of lying on an application form is a complete denial of claim payment. If the insurer discovers that the policyholder misled after the life assured has died, the nominee may be denied the death benefits. This generally occurs only when it is clear that the policyholder lied about a serious medical condition. To avoid a situation like this, it's crucial to be completely honest when filling out the proposal form.

Take Away

A life insurance policy aims to provide financial security to the life assured's loved ones if they pass away—the individual risks jeopardising their family's future by concealing or lying about important facts. Denial of death benefits adds to the family's financial and emotional suffering in addition to the loss of the life insured. As can be seen from the points mentioned above, the consequences of lying on the proposal form are never beneficial and being honest while filling out the application is the way to go.

Also read: 

Common Terminologies Of A Life Insurance Policy

Understanding The Basics Of Life Insurance

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.