If a person lies about their age on a life insurance application, will the claim be deniable?

Question

EVEN IF THE CONTESTABILITY PERIOD HAS PASSED in CALIFORNIA?

Answer 1

When the life insurance company finds out that the insured lies about his/her age, the insurance company will adjust the coverage with the correct rate. The premiums will remain the same, just the coverage will change.

Answer 2

An insurer can only deny the claim if the person was over-age when the policy was applied for. For example, if the insurer only issues policies to folks at or below the age of 65, and the applicant was 66 but lied and said he was 64, then the insurer is under no obligation to pay. Generally, the contract is considered "void ab initio" (rescinded) and the premiums refunded to the estate.

However -- if the person said she was 45 when she's really 55, then the insurer will use the premiums paid and calculate the amount of insurance she would have had by using the correct age. So the amount paid to the beneficiary will be dramatically reduced.

To folks answering that this is insurance fraud: while this is certainly dishonest, it isn't insurance fraud. Most states basically define insurance fraud as theft from an insurer. The applicant in this scenario hasn't stolen, since he or she DID pay premiums. Secondly, the perpetrator is deceased and cannot claim the proceeds -- so how has he or she stolen? Making a misrepresentation is different than theft.

Similarly, most states would NOT consider this a valid reason to rescind a policy UNLESS the person's true age was above the maximum issuing age (see scenario 1 above). However, scenario 2 above represents a non-rescindable circumstance. Generally, a policy can only be rescinded if the insurer can show the person made a "material misrepresentation" to the Company that, if the Company had known the truth, would have resulted in either the declination of the policy OR the policy being issued with a higher rating.

To "CVW_10" above -- you quoted the provision, but didn't interpret it correctly. Your answer should be "No." The insurer can only adjust the amount paid. However, what you've quoted doesn't address the "over age" scenario, which I believe can be used successfully -- even in CA.

Answer 3

If the contestability period has passed, then if the claim is denied you have a defense to that denial. A court will decide whether the misrepresentation of age was material to the risk. In a life insurance policy, age is certainly material to the risk, that's why older people pay higher premiums. There really isn't a "yes" or "no" answer, because if the insurance company denies the claim, you, as the beneficiary, will have to litigate. The outcome of your lawsuit can go either way. I am familiar with claimants on a disability policy that failed to disclose some facts, and even though the suit was only over $5,000 in disability benefits, they were awarded $10 million. $5,000 for special damages, $9,995,000 for punitive damages. But that was because the insurance company really was dealing in bad faith. I don't think you can find bad faith in the denial of a claim based on lieing on the application form. Failure to disclose a medical problem can be excusable neglect (for example, the applicant forgot to mention a hernia operation from 10 years ago). Stating the wrong age on the application is obviously a lie. The policy can be rescinded ab initio (having the effect of never having applied for the policy in the first place), thereby eliminating the contestability issue.

Answer 4

Yes.

From Barricks Insurance Services in California:

"misstatement of age provision -

Life insurance policy wording that specifies the action the insurer will take if, at the insured's death, the insurer discovers that the insured's age was misstated in the application and the misstatement has resulted in an incorrect premium for the amount of insurance purchased. In an individual life insurance policy, this provision specifies that the policy's benefit amount will be adjusted. In a group insurance policy, this provision generally specifies that the policy's premium amount will be adjusted."

Answer 5

This depends on California law, but companies generally cannot cancel a policy or refuse to pay unless there is some evidcence of fraud. If age was put in incorrectly, then the company will change the benefit amount according to the current premium. Good lucks.

Answer 6

After the contestable period has passed you should be fine, but your policy will charge if/when they find out about this misrepresentation.

Typically the insurance company will give you more coverage for an overstatement of age, or less coverage for an understatement of age. This conceptional element will follow you to the grave.

Answer 7

Yes, I believe the term that insurance companies use is called utmost good faith. This means that they trust you to give honest and truthful information about yourself and your property etc on teh application form and should the insurance company see fit then they can refuse to deny the application as they have enough insurance claims to be dealing with.

Answer 8

This is misinterpretation of age. 2 things can happen during claims.

1. claims can be denied

2. they will pay and recalculate back all your previuos year premium based on the actual age, they will calculate the differences and deduct from the claim

if this is a real case, please inform the insurer in writing.

Answer 9

Well... Any other state, I would have said yes... But in California... Well...

No!

The insurance is in force, the company must respect the agreement after the contestability period has past.
 

Answer 10

I would say that the claim has an excellent chance of being denied. Age happens to be something everyone should know. There is NO way to say that you did not know your age. By withholding and or lying this way, You have abridged your right to incontestability.