Term Life Insurance Articles
Potential Consequences From Defrauding A Term Life Insurance Company
2011-01-18
In each term life insurance policy that customers sign before their policies take effect is a clause or clauses that warn the policy holder or third-party claimant of the consequences of trying to defraud the company. This warning is there for a reason. Not everyone is ethical and some people will try to take advantage of companies by committing insurance fraud.
Depending on what state you are in, consequences can at the very least mean denial of coverage and at the worst mean prosecution of criminal and civil charges that could lead to civil damages or imprisonment. For example, insurance fraud could mean hiding, lying or attempting to conceal in some way relevant information about your medical condition knowing that the information might exclude you from coverage in the beginning or deny you a settlement in the future.
As in all insurance, term life insurance policies are based on risk pools, which helps keep rates down overall because not all policy holders need to use their policies at the same time. That means there should be plenty of money available to settle all legitimate claims when necessary.
This is why someone can purchase coverage worth hundreds of thousands of dollars for $20-$50 per month. But when clients attempt knowingly or even unknowingly attempt to get more from a policy then they deserve, it can affect rates overall, which could go up. So insurance companies will act on fraud aggressively and investigate cases thoroughly if there is any case at all.
Sometimes people just try to fudge the facts by not telling the truth about their health on an application because they just don't think they will get caught or that it really isn't a big deal. After all, insurance companies have plenty of money, they may believe. One example of fraud could be a person who knows he had a life-threatening illness that might be considered a pre-existing condition and attempts to cover it up. In this case, the insurance company may detect the lie and deny the application before the policy takes effect.
But if the policyholder died after the policy was in force, and a claimant tried to collect on it, he or she could be charged with fraud after a subsequent investigation, if the insurance company could prove its allegations. Most insurance companies are not going to settle with third-party claimants if there is any reason to believe that fraud exists.
Just the idea of being charged with a felony or having to fight a costly civil lawsuit should make anyone take pains not only to fill out insurance applications carefully, but play by the rules if one needs to make a claim.
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In each term life insurance policy that customers sign before their policies take effect is a clause or clauses that warn the policy holder or third-party claimant of the consequences of trying to defraud the company. This warning is there for a reason. Not everyone is ethical and some people will try to take advantage of companies by committing insurance fraud.
Depending on what state you are in, consequences can at the very least mean denial of coverage and at the worst mean prosecution of criminal and civil charges that could lead to civil damages or imprisonment. For example, insurance fraud could mean hiding, lying or attempting to conceal in some way relevant information about your medical condition knowing that the information might exclude you from coverage in the beginning or deny you a settlement in the future.
As in all insurance, term life insurance policies are based on risk pools, which helps keep rates down overall because not all policy holders need to use their policies at the same time. That means there should be plenty of money available to settle all legitimate claims when necessary.
This is why someone can purchase coverage worth hundreds of thousands of dollars for $20-$50 per month. But when clients attempt knowingly or even unknowingly attempt to get more from a policy then they deserve, it can affect rates overall, which could go up. So insurance companies will act on fraud aggressively and investigate cases thoroughly if there is any case at all.
Sometimes people just try to fudge the facts by not telling the truth about their health on an application because they just don't think they will get caught or that it really isn't a big deal. After all, insurance companies have plenty of money, they may believe. One example of fraud could be a person who knows he had a life-threatening illness that might be considered a pre-existing condition and attempts to cover it up. In this case, the insurance company may detect the lie and deny the application before the policy takes effect.
But if the policyholder died after the policy was in force, and a claimant tried to collect on it, he or she could be charged with fraud after a subsequent investigation, if the insurance company could prove its allegations. Most insurance companies are not going to settle with third-party claimants if there is any reason to believe that fraud exists.
Just the idea of being charged with a felony or having to fight a costly civil lawsuit should make anyone take pains not only to fill out insurance applications carefully, but play by the rules if one needs to make a claim.
