Can a Life Insurance Claim Be Denied for Lying on the Application? Yes—And It Could Cost Your Family Everything
As attorneys who focus exclusively on contesting wrongful life insurance claim denials, we’ve seen our fair share of questionable rejections. In most cases, insurers twist policy language or rely on weak technicalities in hopes that grieving beneficiaries won’t fight back. But occasionally, we come across a case where the denial—while devastating—is legally valid. It’s never easy to tell someone that they won’t receive the payout their loved one intended for them, especially when it’s due to a misstep the beneficiary had no part in. Unfortunately, some policy denials can’t be overturned—especially when fraud is involved.
This article isn’t meant to discourage people from purchasing life insurance. On the contrary, we strongly believe it’s one of the most important financial protections a person can provide for their loved ones. But it’s also a legal contract—and the application process must be taken seriously. If you lie, or even intentionally omit important facts, you may be setting your beneficiaries up for heartbreak when they need that policy the most.
Why Truth Matters: Life Insurance Is a Legal Contract
Life insurance policies are not informal promises—they are contracts governed by the same legal principles as any other agreement. That means both parties—the insurer and the policyholder—must deal in good faith during the application and underwriting process. For the insurer, that means offering coverage according to the terms agreed upon. For the applicant, that means being truthful on the application. If the insurer later discovers that the policyholder lied about something significant, they may be able to rescind the policy and deny the claim entirely.
During the application process, the insurer gathers medical and lifestyle information that helps them assess the applicant’s risk level. Questions typically cover medical history, smoking and alcohol habits, family illnesses, dangerous hobbies, and more. The answers determine whether the policy is issued and at what premium. But if a person intentionally lies about a major health or lifestyle factor, and the insurer later finds out—especially if it impacts the cause of death—that lie may render the policy invalid.
Material Misrepresentation vs. Fraud: What’s the Difference?
Not every inaccuracy on an application is legally fatal. For example, if someone says they weigh 185 pounds when they really weigh 190, that’s unlikely to change the underwriting decision or pricing significantly. These are considered immaterial misstatements. Even modest understatements of health conditions may fall under what’s called a material misrepresentation—a lie that would have changed how the insurer priced the policy, but wouldn’t have led to a full denial of coverage.
Here’s where it gets critical: If the policyholder dies within the first two years of the policy—known as the contestability period—the insurer can investigate the application and rescind the policy if a material misrepresentation is found. That means the claim can be denied, and all premiums returned, even if the misstatement wasn’t intentional. It’s a harsh rule, but it’s legally allowed.
However, fraud is an entirely different category—and much more dangerous to beneficiaries. A fraudulent misrepresentation is one that is both intentional and significant—so serious that, had the truth been known, the insurer never would have issued the policy in the first place. If fraud is discovered—even after the contestability period has passed—the insurer can still legally void the policy and deny the death benefit, leaving the beneficiary with nothing.
Smoking Lies: The Most Common—and Costliest—Life Insurance Fraud
By far, the most common fraudulent misstatement we see involves false claims of being a non-smoker. Cigarette smoking is a well-documented health risk, increasing the likelihood of death from cancer, stroke, heart disease, and respiratory conditions. Because of this, insurers charge substantially higher premiums for smokers—or deny coverage altogether. Some people, hoping to get a lower rate, simply check “no” on the smoking question and hope for the best.
This is a massive mistake.
If an insurer discovers after death that the policyholder was a habitual smoker who claimed to be tobacco-free, it has every right to cancel the policy—even if the claim is unrelated to smoking and even if the two-year contestability period has already expired. Courts often view this as fraudulent inducement, meaning the insurer only entered into the contract because of a deliberate lie. That lie gives them the legal right to walk away, and your loved ones are left without recourse.
Let’s illustrate the difference with two examples:
Example 1: A person smokes a celebratory cigar once or twice a year but marks “non-smoker” on their life insurance application. This is technically a misstatement, but it’s unlikely the insurer would have denied the policy or significantly changed the premium. This might be considered a material misrepresentation, but not fraud.
Example 2: A person smokes a pack a day for twenty years but marks “non-smoker.” The insurer, had it known the truth, would have issued a much more expensive policy—or no policy at all. If that individual dies, and the insurer discovers the smoking history, it may label the application fraudulent and refuse to pay the death benefit.
What Happens When the Insurer Denies the Claim?
When a policy is rescinded, the insurer typically returns the premiums that were paid—but keeps the rest. Beneficiaries are left stunned, often unaware that anything was wrong with the application in the first place. And while many denials are issued on flimsy grounds that can be challenged successfully, denials based on legitimate fraud are much harder to contest.
That said, not every fraud claim is as clear-cut as insurers make it seem. In some cases, insurers overreach, labeling honest mistakes or minor omissions as fraud to avoid paying a large death benefit. In those situations, we’ve helped clients gather evidence, prove intent, and force the insurer to pay. The presence of medical records, statements from doctors, or other corroborating documents can often tilt the case in the beneficiary’s favor—especially if the insurer failed to investigate thoroughly at the time the policy was issued.
Protect Yourself and Your Loved Ones: Be Honest on the Application
If you’re applying for life insurance, tell the truth. Every detail matters—especially around tobacco, alcohol, medical history, and medications. Trying to "game the system" might save you a few dollars now, but it could cost your family hundreds of thousands later. A lie on an insurance application doesn’t just hurt your insurer—it can destroy the financial safety net you’re trying to build for the people you care about most.
If you’ve had a life insurance claim denied based on alleged fraud or misrepresentation, and you’re unsure whether the insurer’s decision is legally justified, contact our firm today. We’ll review the policy, the application, and the denial letter—and we’ll let you know if we believe the insurer acted unlawfully. There’s no cost for the consultation, and you won’t pay us unless we recover money on your behalf.