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What will happen if you lie on your life insurance application?

By Isabelle Coetzee

When submitting your application for life insurance, you’ll be faced with some difficult questions. The life insurer may want to know which health conditions you’re afflicted with or if you’ve ever been a smoker.

If your answers portray a picture of risk, you’re likely to be charged with higher premiums. Therefore, it may be tempting to lie on your application but this could have dire consequences.

We got in touch with a representative from life insurer FMI, a division of Bidvest Life Ltd, and found out what these consequences are and what you need to do to ensure your claims are paid out.

Tip: Get a life insurance quote today by clicking here

The outcome of lies – a loss of R1 billion

According to Brad Toerien, chief executive of FMI, insurance fraud takes place when claimants attempt to gain benefits they’re not entitled to. This includes falsifying documents at application and claims stage and exaggerating impairments to get disability benefits.

“Intentionally misrepresented and dishonest information affects the entire industry and severs trust between clients, advisers, and insurers. Trust is something that needs to be rebuilt in our industry – so that more South Africans have the cover they need when they need it most,” says Toerien.

He explains that there has been a significant increase in fraudulent claims in South Africa in recent years, costing the industry and policyholders more than R1 billion in 2017.

According to the Association for Savings and Investment South Africa, the number of fraudulent death claims jumped from 444 in 2016 to 2111 in 2017 – nearly four times more in a single year.

“Insurance fraud has a major impact on all stakeholders, and it’s ultimately the premium-paying customers who suffer the most, as they carry the cost of ever-rising insurance premiums. This is why insurers need to have a zero-tolerance stance on fraud,” explains Toerien.

READ MORE: Insurance cover for the different stages of your life 

How can you avoid fraud?

  • Know what you’re buying. It’s vital that advisers and customers take the time to understand the product and cover they’ve selected. All South Africans should consult a financial adviser for additional information and advice.
  • Ask questions. If you’re not sure what a question means, or what information is being requested, ask.
  • Stay updated. If your personal circumstances change, make sure your insurance policy is updated accordingly to ensure your cover is up to date. This includes occupational changes (including career moves, starting a business, or even salary adjustments), as well as lifestyle changes (including certain habits or hobbies that may influence a policy’s terms).
  • When it’s time to submit a claim, carefully consider the condition you’re claiming for, and the impairment as a result of your condition. Being 100 % open and honest with your insurer and your adviser is critical.

“Insurers and customers have the same goal in mind - to protect the income they’re yet to earn, and to ensure their ability to provide for themselves and those close to them,” says Toerien. 

He adds that by helping South Africans understand the terms of their cover, and equipping advisers with the tools to offer the best possible product solutions, they can continue to make progress towards that goal.

Make sure your loved ones are covered by taking out life insurance today. 

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