Six Common “Truths” about Life Insurance
People applying for life insurance may not think they are committing fraud when they lie on their applications but that is exactly what they are doing. All they hope to accomplish is a lower insurance premium, but they won’t be doing themselves any favors. After the insurance company finds out the truth, the premiums will go up where they belong.Worse, your family might never collect benefits because of false statements on your life insurance policy.
The Contestability Period
Life insurance policies are under what is called the “contestability period” for the first two years of the contract. If during this time the insurance agent finds any little untruths, the death benefits can be reduced or the entire contract can be declared null and void. Sometimes, people leave things out not intending to defraud the company, but their omission led the insurer to quote a lower rate. In these cases, the insurer will adjust the rates to the rate that should have been charged if the insurer had known about whatever was left out.
The Application Is Part of the Contract
People have to remember that their life insurance applications are part of the entire contract. If an applicant lies on the application, this constitutes fraud.
Denying Tobacco Use
Non-smokers often receive lower rates than smokers do, so smokers are commonly known to state that they don’t smoke when they apply for life insurance. After these people die of lung cancer and it’s now known that they actually were smokers, their survivors pay the price in reduced benefits; they may even lose their benefits completely.
People will go to great lengths to deny drug use including shaving their heads to keep from having to give their hair to test for the presence of drugs. Taking drastic measures such as shaving the head won’t keep insurance companies from finding out about drug use. Insurance companies are very resourceful and they will find out about drug use from a doctor, from a criminal background check or by the applicant’s trip to a rehab facility.
Driving Records Will Be Probed
People might admit to one DUI or one or two tickets, but they often leave out the last three or four they have on their records. Those tempted to lie about how many DUIs they have had in the past need to remember that these things are listed on their driving records and insurance companies make a habit of checking them. When they find a lie in this area, they look more closely at the rest of the application for more possible untruths.
A History of Cancer
Even if the applicants don’t have cancer in their pasts, it may be within their families and this will raise their premiums. To avoid this, people will deny that anyone in their family has had cancer. But these people forget that they were asked about their family history when they went to their doctors and that they told the truth there. Now the insurance companies will know the truth.
It will be difficult to trick an insurance company because they know what to look for and where to find the answers to their questions. Once they know they have been duped, intentionally or not, they will set the premiums where they should have been in the first place and the applicant now has a reputation of being a fraud.