Unfortunately some applicants succumb to the temptation to lie on the life insurance application forms in order to reduce their price of cover. Easy enough, but unfortunately non-disclosure in NZ has some very harsh penalties, including voiding a policy due to non-disclosure.
The 5 biggest porkies told based on Insurer research in the USA is a follows.
- I don’t use tobacco: Non-smokers pay almost half the rates smoker pay, which probably explains why this lie is most common. Typically in NZ, if an applicant fails to disclose their smoking status accurately at the time of application when a claim is lodged the pay-out is reduced by the amount the life insured would have paid has they been paying smoker rates.
- I don’t use recreational drugs: More-often seen with agent applications as the applicant is most likely uncomfortable disclosing this to an unfamiliar life agent. The use of recreational drugs does not necessarily preclude you from life insurance.
- I’m not depressed: Neglecting to mention depression is common. Hopefully as mental health awareness becomes more prominent and acceptable; applicants will be more likely to give full disclosure on their mental health.
- There is no cancer in my family: This lie is more likely a result of ignorance than intention. Having had one family member diagnosed with cancer is unlikely to influence a life insurance application.
- I only ever had one DUI charge: Moral underwriting, as it is known in the industry, is becoming a strong influence in life insurance underwriting. Better to be honest about DUI convictions as they are easy to validate come claim time.