Life insurance is a financial security blanket that takes care of the monetary needs of your loved ones in your absence. Buying life insurance is a huge decision that affects you and your family in the long haul. When you are buying a life insurance plan, using a life insurance premium calculator ensures you that know the estimated premium you are expected to pay throughout the policy tenure. A policyholder should choose life insurance that can be paid with ease throughout the tenure of the policy.
When you buy life insurance, you are required to fill out a life insurance application form. Policyholders have to fill out this form and submit it to begin the purchase of their policy. In the form, they are required to give out several details about their health, finances, career, and basic personal information. These details come in handy for the insurance company, as several of these details help the company in deciding the risk associated with the individual.
What is a life insurance proposal form?
When you buy a life insurance policy, your insurance company provides you with a life insurance proposal form to fill in your details as an applicant. It is a legal document and the details that you mention in it help the insurance company in underwriting. It gives out all the details your insurance company needs to determine the premium of your policy, such as your age, income, medical conditions, location, and occupation. These factors help the company make you an offer of the maximum coverage possible, along with the premium that you would be required to pay. In the form, you also have to provide the details of your nominee. The person who you choose as the nominee will get the sum assured in case of your sudden demise during the policy duration. This form is an important document that directly affects your and your family’s future. Hence, it is important that you fill every detail in this form with thorough consideration. Many applicants hide or lie about certain details to avoid paying high premiums on their insurance. However, if an applicant is caught lying on the form, there are serious consequences that would hamper the benefits of life insurance that the policyholder receives.
What happens if you lie on your proposal form?
The potential outcomes of an applicant who is found lying on their proposal form are severe-
- While applying for a life insurance policy, if the applicant has purposely not disclosed a medical condition intending to get low premiums and the insurance company gets to know the truth, they might immediately revise the premium based on the current health state of the policyholder.
- If the errors in the proposal form are serious or there is a case of multiple discrepancies, the insurance company may decide to investigate. Following the investigation, if the company discovers any information of the policyholder that directly affects their policy, they might close the policy. The company may also prevent the individual from applying for a new policy for a certain period.
- The worst outcome that no policyholder would wish upon themselves is a refusal of claim payout altogether. If a policyholder had lied in their life insurance proposal form and after the demise of the policyholder, the insurance company finds the truth, the consequence would be damaging. The insurance company could deny the sum assured to the nominee entirely. This usually happens when the policyholder has lied about a serious medical condition.
The consequence of lying in your life insurance proposal form is adverse and may lead to losing all the benefits of life insurance. To avoid them, it is important, to be honest with your insurance company and fill out the form truthfully. It is always better to pay a high premium than live in the fear that your nominee may not get the sum assured of your policy altogether in your absence.
What if it was an honest mistake?
Section 45 of the Insurance Amendment Act states that life insurance policies cannot be called into question on any grounds after the expiry of three years from the date on which the policy was purchased. This means that your insurance company has three years to voice any concerns regarding the information that you have provided. Nonetheless, you must disclose every bit of information truthfully to your insurance company to avoid any dire consequences during the time of claim.