What Happens if You Lie on Your Life Insurance Application?

Quick Answer

In a number of cases, a life insurance policy might not provide a payout if the insurer discovers you lied on your application. Therefore, it’s important to be truthful about everything when applying for life insurance.

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A person might have several reasons for not being entirely truthful when applying for life insurance, but it often boils down to cost and coverage. For instance, they want to pay a lower premium, or they worry that they won't be covered if they disclose certain information, such as a medical condition or tobacco use.

Lying to a life insurer can come at a hefty price, though. The insurer may not issue a payout if it discovers you lied on your application. An insurer also might decline your application or even cancel your policy if it finds out you provided false information.

Why Do People Lie on Life Insurance Applications?

Lying on life insurance applications is more common than you might think. A 2020 survey by Finder.com indicated that 14.7% of American adults admitted lying on an insurance application.

So, why do people lie on life insurance applications? The reasons for lying frequently revolve around health status.

For example, someone might lie about their smoking habit in hopes of scoring a lower premium. Life insurers often charge higher premiums for tobacco smokers, tobacco chewers and those who vape or use similar products because they're taking on a greater risk by insuring someone who engages in unhealthy behavior. Life insurers also may take cannabis use into account when reviewing an application.

Someone also might lie about a parent having had heart disease or cancer in order to qualify for life insurance coverage.

Other lies that might lead to trouble with a life insurer include:

  • Inflating your income to qualify for a higher payout amount
  • Being dishonest about drug use
  • Lying about a drunk driving conviction
  • Not being upfront about a depression diagnosis
  • Not disclosing a previous serious illness

Consequences of Lying on a Life Insurance Application

The potential consequences of lying on a life insurance application range from relatively minor to serious. They include:

  • Being asked by the insurance company to revise the section of the application that's being questioned
  • Having the application rejected
  • Being hit with higher insurance premiums
  • Having the policy canceled
  • Winding up with a lower payout than expected for a claim
  • Having a claim denied if false information is discovered within the first two years of the policy being issued (known as a contestability period)
  • Being sued for fraud over a claim that was filed after the two-year contestability period ends (If the life insurance company can't prove alleged fraud tied to a claim submitted after the two-year period, then it likely will be forced to pay the claim)

When an Insurer May Discover You Lied

A lie told on an application may crop up during the underwriting process when an insurer determines whether you're insurable and how much your coverage will cost; after a policy has been written; or after the policyholder has died and their beneficiaries are seeking a payout.

Many life insurers require a medical exam before approving someone's application for coverage, and the exam could uncover a lie on an application. (It's worth noting that some life insurers offer no-exam coverage.)

Omitting or Fudging Information on the Application

A lie on an application also may come in the form of omitting or fudging information. If you unintentionally lie on an application, it might not be a big issue. But if you intentionally lie on an application, the life insurer may view this as fraud and may end up rejecting your application.

Minor omissions of fact typically don't affect an application. Similarly, supplying wrong information, such as an incorrect address, shouldn't cause a problem. However, something as seemingly innocent as providing a lower weight or lower age might prompt an insurer to void your policy or may result in a reduced payout.

Lying on the Application

A serious lie on an application also may come to light after a policy is issued. Within the first two years of coverage, a life insurer can contest any information you supplied that they now believe is false.

Later on, a lie on an application might trip up a claim filed by the policyholder's beneficiaries. If, for instance, the policyholder had diabetes but failed to disclose that on their application, the insurance company may deny the claim or may reduce the payout amount, particularly if the cause of death was related to the false information. Furthermore, the insurer might file a fraud lawsuit against the policyholder's estate.

What if Your Circumstances Change After Buying a Life Insurance Policy?

Ordinarily, your policy will remain intact even if your circumstances change after buying life insurance. If, for instance, you take up a risky hobby like skydiving or start smoking cigarettes after purchasing the policy, your coverage shouldn't be affected. Why? Because the policy weighs your lifestyle factors at the time coverage is issued and not any subsequent lifestyle changes.

The Bottom Line

You've probably heard the old saying that "Honesty is the best policy." Well, that saying definitely applies to filling out a life insurance application. Being honest about all of your personal information can give you a better chance of qualifying for a policy—and of your beneficiaries receiving a payout after you pass away.