Best Life Quote

Lying on Your Life Insurance Policy

Written By Doug Mitchell

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA.  Doug has spent close to 30 years in the insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health.  Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

Holly Mitchell  &

Holly Mitchell’s background in life insurance insurance goes back to 1985 when she worked for her father who was a New York Life agent. Holly has a marketing degree from Auburn University and has had a life insurance license since 2008. In addition to advising life insurance for customers all around the country, Holly is our website fact checker.

Rob Pinner   &

Rob Pinner is the founder and CEO of Pinner Financial Services servicing all 50 states. Rob started his insurance career in 2002.

Louis LaBash

Results-driven and innovative life insurance professional with 30 plus years of life insurance industry sales and marketing experience. Recognized as a pioneer in the field, leveraging phone and internet channels to exceed personal sales of over $100 million during the first decade of the 21st century. Creator of a highly effective intuitive IUL life insurance sales software that facilitated the sale of millions of dollars of indexed universal policies by numerous life insurance agents. Proven track record as a Managing General Agent (MGA), Life Agent, IUL Life Insurance Sales Software developer, and leading-edge creator of insurance marketing tools, educational content, and delivery systems.

Table of Contents

Everything you know about telling a lie is true. It isn’t a good idea. No news flash, of course — lying about anything can get you in trouble.

But if you think about it, telling the truth often isn’t any great shakes either. That’s why so many people who could tell the truth, don’t. You rarely see in the news, somebody coming forward and saying, “Hey, I was the one who robbed that bank the other day. Sorry about that. All is forgiven?”

Meanwhile, few dinner guests ever tell a host, “This wasn’t very satisfying.” Wives and girlfriends, even if they feel otherwise, tend to avoid using the same phrase with husbands and boyfriends in the bedroom.

And no matter what you might be thinking, when asked, everyone seems to agree that the appropriate reply is always: “No, that outfit doesn’t make you fat.”

Lying On Your Life Insurance Application

But even though we all tell white lies, the truth is still, usually, always the better way to go. This is something to keep in mind if you ever consider lying on a life insurance application.Swearing an oath with fingers crossed behind back concept for dishonesty or business fraud

It’s tempting to lie or fudge the truth or omit some bit of information, of course. And it’s perfectly understandable why anyone would. Life insurance tends to cost more — quite a bit more — if you smoke.

They also don’t like it if you do drugs. If a life insurance company believes you’re an alcoholic or prone to becoming one — perhaps you’ve had a couple of DUIs that you don’t feel like mentioning on the application — they see that as very risky. And that you may not be long for this world.

Not compared to the other guy or gal, who doesn’t drink much, doesn’t smoke, and doesn’t do drugs.

The last thing you want is to be denied a life insurance policy. But understandably, you don’t really want to pay higher premiums either.

However, you’re nonetheless smarter to take your medicine or cut back on the vices and give up the cigarettes forever. Then in several months, apply, knowing you’re telling the truth.

The truth may not set you free, exactly. But tell a lie, and it may cost you far more than if you had told it like it is on the application.

Cost of Lying On Your Life Insurance Application

“Lying on your life insurance policy carries different ramifications,” says Leonard Wright, a CPA, personal financial specialist and wealth management advisor at Northwestern Mutual Wealth Management Company in San Diego.

The biggest ramification, naturally, is that the insurance company may decide that they don’t need to pay the benefit, Wright says. “They would be required to refund your premiums,” he adds.

Especially if the insurer suspects some sort of fraud or that something needs to be checked out, “the insurance company will go back to the medical records and do a thorough inspection of all doctors seen prior to the death,” Wright says.

He adds that this sort of investigation is very typical if it’s what’s called “the contestability range.” Usually, that’s within the first two years of a policy.

If an insurer does discover fraud — or stretching the truth — there is that chance that your family wouldn’t lose the life insurance money. Instead, it’s possible that the benefit would simply be reduced.

Lying About Smoking on Life Insurance Application

“If they find out that you were a smoker, they may adjust the amount of life insurance paid, based on how much life insurance the premium would have purchased at smoker rates,” Wright says.

“So if you were a smoker when you applied for the policy, and it was determined that you’re a smoker and lied on the application and the cost of insurance was two and a half times what it would’ve been otherwise then you would get the amount of insurance equal to one divided by two and a half times the face amount.”

Better than nothing, but probably quite the comedown from what your spouse might have been expecting.

So how would an insurer do its investigation? Well, an insurer will always look at the autopsy report, as grim as that sounds.

An investigator is really privy to a variety of third-party sources, including motor vehicle reports, doctors’ records, pharmaceutical database searches, paramedical exams, and even your credit report. They will also take a look at the data from the MIB Group.

Lying on Application and the MIB Group

Based in Braintree, Massachusetts, MIB Group is a cooperative data exchange created by the insurance industry back in 1909. According to the FTC, 99 percent of insurers are members of the MIB Group.

The organization collects records of previous life insurance and health insurance policies, as well as applications you may have filled out for disability income, long-term care or critical illness insurance.

The MIB Group can be your best friend if you’ve been honest on your life insurance policy, and an insurer suspects something is up. But if the data makes it clear that you weren’t in the best of health but suggested you were on your new life insurance policy, then, yes, it can be like the school bully in the playground — your worst nightmare.

Now, if you completely lie on your policy and the contestability range passes, generally, a policy will pay the life insurance without an investigation. That, of course, is why some policyholders presumably go for it and fudge the truth — or go for out-and-out fraud.

They plan on being around longer than two years, and they feel that it’s worth the risk.

But would your spouse or children feel that way? That it was worth the risk. If something went wrong, and you, let’s say, lied about smoking in order to get a smaller premium, and then you contracted lung cancer a few months later and died within the contestability period.

Boy, that’s a grim thought — sorry to bring everyone down — let’s talk about that video with the cat chasing the dog and saving that boy for a moment… Wasn’t that amazing?

Ok, well, back to the grim thought.

Finally, Should You Lie On Your Life Insurance Application

So let’s say that you end up cashing in your chips, and your life insurer does its research, concludes that you managed to hide your addiction in some way but were actually a regular, life-long smoker and decides not to give your family all of the money you had hoped they would receive if something like this happened?

Do you think they’ll shrug it off? Do you think your wife or husband will look up at the sky someday and say, “It’s okay, honey, that you lied on your insurance policy, and we wound up getting nothing.

I don’t mind in the least. I’ve always thought migrant work would be a good way for our family to see different parts of the country.”…?

I’m guessing, probably not…

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Picture of Doug Mitchell, CLU

Doug Mitchell, CLU

Doug Mitchell, CLU holds a BA degree in Finance from Auburn University as well as having obtained a Chartered Life Underwriter (CLU) designation from The American College in Bryn Mahr, PA. Doug has spent close to 30 years in the life insurance and financial planning industry and has held licenses to sell securities, long-term care insurance, health. Some other notable items about Doug: Top of the Table Million Dollar Round Table member (MDRT). (MDRT is a global, independent association of the world’s leading life insurance advisors) | Premier Partner with Lincoln Financial and Cabinet Member | Served two years as President of the Auburn/Opelika Association of Financial Advisors | Life Millionaire status at Horace Mann Insurance Company and was awarded the Life Agent of the Year Award | New York Life, Executive Council Member | Currently serves as President of Ogletree Financial, a life insurance General Agency. | Doug is also a financial blogger addressing the topics of life insurance, annuities and retirement income planning.

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