What is the big deal about “Lack of Candor”

Posted by on Jun 8, 2017 in BBA Blog

On occasion, individuals like to play “Truth or Dare” with life insurance companies. Sometimes it is deliberate and sometimes it’s not. Those doing it deliberately are basically not providing honest information to the carrier.  Can’t they just go back to the carrier and say “Oops, sorry, I forgot!”?

Lack of candor or being dishonest to a life insurance company is a big deal. It involves both the omission and/or misrepresentation of information. The first issue is being dishonest in the application process. If your client would happen to get away with it and a policy goes inforce, they would be putting their loved ones at risk of not receiving benefits when an investigation is done at death.

Secondarily, the fundamental hurdle with lack of candor is the question of what else they might be hiding. The carrier needs to trust the information that their mortality decision is based upon.

Some carriers take a hard and fast line on lack of candor. You lie to the insurance carrier, you are declined.  Others take a broader view of the significance of the information – how relevant is the information that is missing?  Trying to hide things like heart issues, stroke, cancer, mental disorders, substance abuse, multiple DUIs and adverse financial history are a big deal in the underwriting process and will result in an immediate decline.

In speaking with one of our carriers I found they are also having problems in this area with the language barrier and some clients that do not speak English as a first language. The carriers are concerned that the proposed insured may not have an understanding of the questions asked, the contract language and/or what they are attesting to with their signature.

So can your client still get coverage if they omitted information on an application? The answer is maybe.  They can apply to a different carrier being fully truthful and disclosing all medical or financial information requested and depending upon if they are insurable, they can get coverage.  Unfortunately your client has now wasted their time, your time and the carrier’s time trying to get away with not admitting all of the relevant information when they first applied for life insurance.

Bottom line, tell your client to be honest on their life insurance application so it won’t come back to bite them later! Let them know, with all of the big data out there today, the carriers will find out.