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What Happens If You lie On A Life Insurance Proposal Form in USA

Lying on a life insurance proposal form can have consequences, not only for the life assured, but for his or her family as well. Read this article to know about the repercussions of intentionally attempting to deceive an insurance provider.

Lying is never okay on a life insurance application form. In fact, it can be an expensive mistake.

Prior to availing a life insurance cover, an individual has to complete an application with the insurance provider. The applicant will need to share certain information pertaining to his finances, health, and career, among other things. These details are used by the company to determine how much of a risk an individual will pose. It may seem tempting to withhold certain facts or even lie on the proposal form to paint the applicant in a better picture. However, it is most essential to be truthful. If it is found that an applicant has lied on the form, he or she might have to bear serious consequences. Now, before we look at the outcome of lying on the application, let us quickly understand the meaning and importance of the proposal form.

What is Life Insurance Proposal Form?

A proposal form is a legal document that has to be filled out by the applicant so that the insurance company understands the individual well. The form seeks all relevant information from the applicant that helps the insurer in underwriting. In life insurance, the proposal form will require details like age, income and occupation. The age helps determine the premiums payable, while the income is used to ascertain the level of coverage that can be extended. The form will also require nominee details, which is important as they are needed to ensure that the benefit reaches the right hands.

Possible Consequences of Lying on Life Insurance Proposal Form

Here is a look at the possible scenarios that could arise if and when the life assured is caught lying on the proposal form:

If an individual withholds from disclosing a medical issue with the intent of getting lower premiums and the company finds out about the same, it might just revise the premium to reflect the inclusion of the earlier omitted health information.

In case multiple discrepancies are found or the errors are more serious, the insurer might begin an investigation. Following the investigation, if the company discovers an undisclosed medical condition, it may close the case and prevent the individual from applying again for a certain duration.

The worst outcome of lying on the application form is refusal of claim payment altogether. After the life assured’s demise, if the company realizes that the policyholder has lied, then the nominee could be denied the sum assured. This usually only happens when it is evident that the policyholder had lied about a very serious medical issue. To prevent such a situation from arising, it is very important to be honest while filling the proposal form.

3-Year Cause

According to Section 45 of the Insurance Amendment Act 2015, life insurance policies cannot be called in question on any ground after the expiry of 3 years from the date of their issuance. This essentially means that an insurance provider will have 3 years to raise any objections concerning the insured declarations. While the insurance regulator has not explicitly said that frauds are excluded from the purview of the Act, insurers say it is internally understood that claims clearly found to be fraudulent shall not be paid, various news reports have suggested.

Irrespective of the 3-year incontestability clause, applicants are advised to truthfully disclose all material facts when availing insurance. The doctrine of utmost good faith (uberrimae fidei) is a principle applicable to insurance contracts. It states that the insurance company and the life assured must disclose all material facts before the policy inception. Material facts here mean facts that may enhance the level of risk.


Honesty is most definitely the best policy when it comes to buying life insurance. The purpose of having a life cover is to financially secure the loved ones of the life assured in the event the individual is no more. By withholding or lying about critical facts, the individual risks putting the future of his or her family at risk. Besides having to go through the loss of the life assured, denial of death benefits adds to the family’s financial and emotional turmoil.

Thus, it can be concluded that the consequences of lying on the proposal form are never good (as seen from the points mentioned above). Being honest while filling out the application is the way to go. If one is concerned that something in his or her medical history or lifestyle could drop the chances of getting an affordable insurance policy, the individual should talk to a trusted insurance agent. It is always better to disclose all information and even pay a higher premium than to leave the surviving family members without a safety net in case of a claim.