We might say that traffic was crazy, when we really just left late, or we might embellish a story to make it sound more interesting. These things happen everyday and are, for the most part, harmless. However, when it comes to applying for life insurance, any lie, omission, or misrepresentation, however small, could put your life insurance policy at risk of being void. If this were to happen, your beneficiaries may be left with nothing to claim from your policy when you are gone.

Why is the truth so important?

When you apply for life insurance, your application goes through “underwriting.” Underwriting is the process by which an insurance company evaluates an insurance application, considering different risks. Your specific risk is determined by how you answer the questions in the life insurance application. These questions focus in on areas that can impact your life and well-being like your health status, family history, occupation, and hobbies as well as things like your height and weight.

Your life insurance advisor will work with you to determine the amount of type of insurance and amount that will meet your needs and then it is up to an underwriter to look at risk based on your answer to the questions in the application. If you lie, omit, or misrepresent any information in response to the questions on the application, the insurance provider (underwriter) is evaluating your application based on incorrect or incomplete information and the conclusion that they reach about your insurability may be different from what they would decided if they had complete and accurate information.

How will anyone ever know?

You may wonder how anyone would ever know if you answered some questions on the life insurance application less than truthfully. For example, maybe you are planning to go skydiving, but you don’t want to disclose this activity. Since you’ve never skydived before, and you’re not planning on going for at least a few months, you say “no” to the question about whether you engage, or plan to engage, in any hazardous or extreme sports.

Now…fast forward to that fateful day and your skydiving activity doesn’t end as planned. When your beneficiaries make a claim on your life insurance policy the cause of death will be noted, and the insurance provider may question the discrepancy between your claim to not skydive and the cause of death. At this point an investigation may be launched. It may be discovered that you had already booked skydiving lessons when you filled out your life insurance application, or maybe you had even scheduled your first dive. This information coming to light could affect how a claim is settled and the policy may be void for misrepresentation. To be clear…if you had no intentions of skydiving at the time of the application and decided months or years later to take lessons and things went south, it would not be considered an omission or misrepresentation on your application.

What happens when they find out?

That depends on what the issue is. Some lies, omissions or misrepresentations may result in the policy being null and void while others, like an inaccurate date of birth, may affect the face value of the policy. Each case is different, and each case will be assessed and managed individually.

When applying for life insurance it is important to always be truthful, and if you don’t understand a question, or don’t know how to properly answer it for your particular situation, always consult with your life insurance advisor who can help you understand the information requested.