The process of obtaining a life insurance policy involves submitting an application with identifying information. Additionally, life insurance providers often aim to gather as much information about your lifestyle and health as reasonably attainable. Whether through family history, health history or a recent physical exam, an insurance provider can use this information for purposes of risk assessment. Depending on the risk associated with one’s livelihood, an insurance provider can run the numbers and put together an accurate quote for a policy that balances adequate coverage and lessens the chance of them taking the hit from an early death by the policyholder.
Due to the intricate formula involved in these policy quotes, it is important for all the information provided to be as accurate as possible. For some individuals, they understand the impact certain health or lifestyle risks can be to a life insurance policy and may opt to misrepresent their health or lifestyle in order to get a more favorable policy (lower premiums, higher policy value, etc.). However, we would strongly discourage applicants from being untruthful in any manner when it comes to a life insurance policy. After all, it is not you that will be harmed by these misrepresentations, but your beloved beneficiaries as their claims may be denied upon your death.
If a life insurance provider has any reason to believe there may have been a material misrepresentation in the policyholder’s application following an unexpected death, the insurance provider may elect to investigate the matter before releasing any payments to the beneficiaries. If the insurance provider is able to establish a material misrepresentation was made during the application process, the provider will be able to deny a claim for payments to the beneficiaries. This would result in presumably a large amount of money being paid in premiums to the insurance provider during the life of the policyholder, with no payouts being made and the insurance provider getting to pocket the entire sum. This would be a terrible situation for any beneficiaries that may be relying on the policy paying out for their livelihood following the death of the policyholder.
In order to avoid this situation, readers will want to understand what equates to a “material misrepresentation”. Loosely defined, a material misrepresentation is a fact that has been intentionally hid or misstated and would have significantly altered the basis for which a contract is built around. In terms of life insurance, some examples of a material misrepresentation would exist if the applicant for a life insurance policy misstated his or her age by a large number of years, intentionally hid the diagnosis of a life-altering disease or even failed to disclose certain details about a risky lifestyle that may result in a higher chance of sudden death.
While certain facts about health or lifestyle may seem minor to an applicant, an insurance provider needs to have a complete picture in order to provide an accurate policy. That being said, it is important to think long term towards the livelihood of your beneficiaries versus the few bucks you may save every month from a misrepresented and favorable policy.
If you have a delayed or denied claim, our life insurance attorneys will get you the full amount of the policy.