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Lying to Insurers

Insurance companies issue insurance policies filled with stipulations – stipulations that will void your policy if they are not met. Sometimes, individuals commit fraud thinking that they can lie to their insurers in order to avoid these stipulations, but this very dangerous game can result in huge losses for your family.

Lying to insurers is also known as Material Misrepresentation because it involves the misrepresentation of facts that are material to the issuance of your insurance policy.

How will the insurance company find out I lied?

While material misrepresentation can happen with any insurance policy, for the purposes of this article, let’s talk about it with regards to the purchase of a life insurance policy. When you apply for a life insurance policy, an underwriter looks at your application and many different types of supporting documents and tests in order to figure out whether or not you are accurately representing your health during the application process. In doing so, they will often find evidence of misrepresentation through a medication you’ve been prescribed, from reviewing your doctor’s records, or from the results of a paramedical exam.

If they do not catch the misrepresentation before the policy is issued, then when you pass away another examination can be done of your health before your claim is paid. So if you die 8 months after your policy is issued, and you die of a medical condition that would have taken longer than 8 months to manifest, the claims officer will review your medical information again, looking for any information that you left off your application.

What happens when they find out I lied?

If you are caught having lied to the insurance company and misrepresenting your health, your insurance claim – no matter what type of insurance we are talking about – will be declined. You (or your beneficiaries) will not get the money that you worked so hard to make sure was there. After the misrepresentation is discovered the insurance company will generally void your policy and return all your paid premiums. It will be as though you never had an insurance policy at all. Depending on the type of insurance you have, it is also possible that the insurance company might take legal action against you for attempted insurance fraud – a very serious crime.

What is the better option?

As with everything in life, it is always better to be honest. Even if it makes it more difficult to get a policy, or more expensive, or you have to accept a policy with aggressive conditions, honesty about your health or any other underwritten aspect of your policy is important because if ensures that you actually have a policy – you don’t just have a made-up policy that won’t come through when you actually need it.

So be honest about your situation and the insurance company’s risk and shop around for an insurance company that is willing to issue your insurance policy even after getting all the facts. You and your family will be grateful that you did.

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