Why Honesty Is The Best Policy When Applying For Life Insurance

Being completely honest on a life insurance application is essential to prevent any problems for the beneficiary. A life insurance provider can deny a policy payout if the company finds evidence of fraud taking place the application process. Applicants are required to disclose medical issues and risky habits that could be connected with early death. That doesn't necessarily mean the application will be rejected, but the insurer might require higher premiums to offset the additional risk.

Underwriting

Denial of life insurance claims is unusual. In regard to dishonesty on the application, claim denial typically happens if the death is related to undisclosed health disorders or risky behavior. Life insurance underwriters rely on statistics to decide whether to deny an application or charge a higher rate. Many factors are significant in their predictive value.

Driving Incidents

For instance, an applicant might lie about having a clean driving record when he or she has actually been convicted of driving under the influence. Citations for running red lights, license loss due to multiple speeding tickets, and being at fault for a previous collision can also be cautionary signals for life insurance providers. If the person is later killed in a vehicle collision, the insurer could justifiably refuse to pay the beneficiary.

Smoking

Not admitting to being a tobacco smoker is another reason the insurer could deny payment. Any number of health issues are connected with smoking. Claim denial might occur if the policyholder dies of lung cancer or complications from chronic obstructive pulmonary disease. Smokers also are at higher risk of heart disease. 

An applicant may not smoke daily, but might indulge in cigar smoking with friends on Saturday afternoons. To categorically state that he or she does not smoke tobacco is untruthful. A brief explanation on the application helps the underwriting department understand the level of risk.

Risky Behavior

Life insurance applicants are expected to list any potentially risky behavior they routinely indulge in. Flying a small airplane, skydiving, and race car driving are just a few examples. Even if the applicant's primary occupation is considered safe, riskier part-time work should be noted. Examples include roofing and operating agricultural equipment.

Medical Issues

Not disclosing a medical condition can lead to claim denial if the person passes away from that health problem. This is especially likely if the policy had been purchased within two years of the individual's death. 

If an applicant is unsure about how to fill out the paperwork, assistance is available from independent agents and life insurance company representatives. 

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