Insurance companies have warned customers about the dangers of lying on their insurance application forms. It has come to light that millions of people are in danger of having their life insurance policies cancelled due to lying about the status of their health.
Insurance companies tend to give cheaper premiums to people who can prove they are healthier and live a healthy lifestyle.
For example some companies cut down the premium rates of policy holders who buy healthy foods whilst others lower rates for policy holders with gym membership.
In recent times life insurance companies have offered new incentives like cutting the premium rates of non smokers as well as customers who do not use drugs or drink less.
For customers to be classified as a non smoker they will have stopped smoking for over 12months, this saves them £2,016 a year.
This has led to customers in poor health to lie about their health status in order to get cheaper rates. According to a new research 1 in 20 people lie on their insurance application forms. A Friend’s Provident study showed that 90% of people claim to always tell the truth on insurance applications however 5% admitted to lying on application forms. Whilst a fifth of people do not read the full terms and conditions on a policy when buying insurance.
A further study by Norwich Union found that 1 in 14 customers lied about their health and life style when applying for Life Insurance. This has prompted insurance companies to demand customers to prove their health status or risk having their policies cancelled, pay higher premiums or their claims refused. Half of some 5000 customers they wrote to have replied back and admitted to lying which could render their policies invalid.
Lying on your life insurance policy application could end in personal and financial disaster according to Ian Durrell of Only insurance, "Smokers who declare they have given up but continue to smoke no matter how infrequently will be paying for nothing should they die from a smoking related condition; The policy simply won’t pay out and their beneficiaries will be the losers."
"Smokers will pay twice the price for critical illness cover than a non-smoker – it’s a no win situation for the smoker, their nicotine addiction is tightening both their heart and purse strings," concluded Mr. Durrell
Also things like having your life insurance policy pay off your mortgage and other debts when the breadwinner of the family dies could be snatched away if you lie on your application forms.
Many insurance companies may be writing to their customers to ask for proof of their health status and those found to be lying could be made to pay higher premiums or have their policies cancelled all together. Currently insurers reject about 25% of claims because of misinformation.
Getting life insurance is there to protect and give peace of mind, so when taking one it’s a good idea to do some research and seek advice first. And to avoid being disappointed when it comes to making a claim, read the terms and conditions carefully and clearly and answer the questions truthfully.
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