Life insurance claims are frequently denied when an insurer alleges fraud or misrepresentation in the policy application. While insurers are permitted to rescind coverage in limited circumstances, these denials are often issued without meeting the legal standards required to void a policy.
Fraud and misrepresentation are not interchangeable, and insurers must satisfy specific proof requirements before denying a claim on either basis.
The Difference Between Fraud and Misrepresentation
Fraud generally requires proof that the insured knowingly provided false information with the intent to deceive the insurer. Misrepresentation involves an incorrect statement, but intent is not always required.
Many denied claims are labeled as fraud even though the insurer does not allege or prove intentional deception. In practice, most disputes involve alleged misrepresentation rather than true fraud.
When Misrepresentation Allows Rescission
Insurers may attempt to rescind a policy if they claim that an incorrect answer on the application was material. Materiality typically means that the insurer would not have issued the policy, or would have issued it on different terms, had the correct information been disclosed.
The burden is on the insurer to prove materiality. It is not enough to show that an answer was inaccurate.
Common Problems With Misrepresentation Based Denials
Fraud and misrepresentation denials are frequently challenged because insurers rely on flawed assumptions, including:
Vague or ambiguous application questions
Medical information the insured did not know or was never diagnosed
Conditions unrelated to the cause of death
Inconsistencies discovered only after death
Underwriting issues that were never addressed before issuing the policy
Courts often reject rescission when the insurer could have identified the issue during underwriting but did not.
Intent Is Often Missing From Fraud Allegations
True fraud requires proof that the insured knowingly lied. Many denials lack evidence that the insured understood the question, knew the information was false, or intended to mislead the insurer.
When application questions are subjective or poorly defined, insurers often struggle to prove fraudulent intent.
Contestability Period Does Not Guarantee Rescission
Insurers frequently point to the contestability period as justification for denial. The contestability period allows investigation, but it does not automatically void coverage.
Even during the contestability period, insurers must still prove that a material misrepresentation occurred and that it justifies rescission under applicable law.
Post-Claim Underwriting Is Closely Scrutinized
Many fraud and misrepresentation denials are based on information uncovered only after a claim is filed. Courts often scrutinize post-claim underwriting, especially when premiums were accepted and no concerns were raised before death.
Rescission based solely on hindsight review is often viewed skeptically.
Documentation Issues Are Not Proof of Fraud
Missing records, incomplete files, or inconsistent medical histories do not automatically establish fraud. Insurers must connect the alleged misrepresentation to a specific application answer and demonstrate why it mattered.
Absent that connection, denial is often improper.
What Beneficiaries Should Do After a Fraud or Misrepresentation Denial
If a claim is denied based on fraud or misrepresentation:
Request the full denial letter and policy citations
Identify whether the insurer alleges fraud or misrepresentation
Review the exact application questions at issue
Examine whether the insured knew the information alleged to be false
Preserve all medical and underwriting records
These cases often turn on application language and proof of intent rather than the insured’s health history.
How This Issue Fits Into Life Insurance Claim Disputes
Fraud and misrepresentation denials are a specific subset of denied life insurance claims. They differ from exclusions, lapse disputes, and beneficiary conflicts because the insurer challenges whether the policy was validly issued.
For a broader discussion of denial categories, see your Denied Life Insurance Claims and Application Misrepresentation pages.