|
Are there any consequences for lying on your life insurance application?
Most life insurance policies have a two-year contestability period that allows a life insurance company to deny a death claim if it discovers that a policyholder lied about a medical condition on his or her application. For example, let's say you were a smoker but you did not disclose it on your application. If you died from lung cancer within two years of buying the policy, the insurer could have grounds to not pay the death benefit from your policy.
An insurance company also has the right to deny or amend the payment of a policy after the two year contestible period if the applicant made a "material misrepresentation" on the application. The exact decision depends on what was misrepresented and how it would have affected the underwriting decision.
If a policyholder lies on an application and dies after the two-year contestability period, the insurer could still pay a death claim equal to the amount of life insurance you would have purchased if you had disclosed your medical condition. For example, let's say you paid $500 a year for a $100,000 policy, and you died from lung cancer five years after you applied for coverage. The insurance company may pay your beneficiary a death benefit less than $100,000 because you were not paying the higher smoker rate for the same policy.
Back to frequently asked life insurance and annuity questions
|
British Citizens:
Canadian Citizens:
