Why should you never provide wrong information while purchasing a life insurance policy?
A life insurance policy acts as an extra security shield from the financial burden that might arise to the family in case of breadwinner’s demise. However, life insurance policies nowadays also provide investment opportunity along with life coverage. Hence, for financial stability during unprecedented situations and to achieve various financial goals, people opt for life insurance policies.
But life insurance policy comes with different terms and conditions so that people do not misuse its benefits. The insurer asks for various details like income, profession, health status, lifestyle habits to check your eligibility as well as to determine the insurance coverage amount. They scrutinise all aspects, check the risk factor involved and then accept the application and decide whether it will be issued on the same premium or with a loading.
However, people think that they can get away by giving false information, but that is not true. To prevent extra loading, people often provides false or misleading information. But they do not realise that disclosing incorrect information can have other severe repercussions like the rejection of claim or even non-acceptance of the application.
So, let’s know about the most common misleading information that people usually mention.
- Use of tobacco the policy premium rise to 20 to 25 percent
- Smoking and drinking
- Present and prior use of drugs
- Medical history – both the applicant and family
- Income – exaggerating the salary to be qualified for higher protection
- Any pre-existing disease
But how people get caught by disclosing misleading information?
Before issuing a life insurance policy, insurance companies do a thorough background verification and ask for relevant documents. They can have direct access to the records kept up by the Medical Information Bureau (MIB), which is like a database that monitors significant medical happenings. Insurers conduct medical examination and request for a detailed medical report to verify what applicant has mentioned. They also arrange for medical tests from a third party for a more thorough investigation. Furthermore, in case they find any false financial disclosures, then they might ask for an individual’s finance reports to be assure about applicant’s financial status.
What if someone gets caught for giving the misleading information in the application form of the life insurance policy?
Even though people are aware of the results of disclosing false information, they still think that they can get away with it. But failing to provide the correct information might result in lesser benefits. The insurance provider might also ask for a higher premium due to the lack of trust and as a penalty for disclosing wrong information in the application form. Even if an individual is healthy and eligible, the insurer would refrain offering several benefits to him or her and might charge with higher premiums. Lying about personal details might also result in the rejection of claim when required. This could severely impact a family who is supposed to receive the life cover after the demise of the policyholder when they need financial assistance the most. And if the extent of lie is very big, it might result in the cancellation of the policy application if it is active as well as the rejection of death benefits.
And what if the lie does not get caught during the application process?
Somehow, if the insurer does not catch the false information and the policy gets issued; still, there is a chance that the insurance company can figure out the lie. All life insurance providers have a two-year contestability period wherein if the insured person dies within this period; the insurer has all the rights to re-evaluate the application. And if that point, they find out that the policyholders had disclosed wrong information then they can cancel the coverage or the death benefit amount which means that the policy nominee would not get any insurance coverage amount.
Therefore, you should always avoid sharing false information to the insurance provider about yourself, whether it is your health, income, or anything else. Due to the simple reason that lying might lead to severe consequences which could further impact your family’s requirements when needed. If you need more information on the same, you can speak to the insurance experts of BimaKaro.in. The best practice is to mention everything correct and truthfully to avoid hassles at the later stage.