EVERYTHING! The last thing anyone wants for their family, after their death, to be told that the life insurance policy they THOUGHT they had is being contested for lack of disclosure. Why give an insurance company a reason NOT to pay your family?

One of the most common examples of this is the failure to disclose tobacco use. Tobacco use at many life insurance companies can cause your rate to be triple that of a preferred non-tobacco user. So, uninformed people figure that if they lie about their tobacco use, that they can get the lower rate. First of all, it's not that easy. Most carriers will examine your medical records and most doctors have notes in their files regarding their patients' tobacco use. Second, in order to qualify for life insurance, you must typically submit to a paramedical exam, which includes the drawing of blood and collecting of urine specimens. These fluids are tested for chemicals that would indicate the use of tobacco of any kind.

More after the jump...

It never ceases to amaze me as to how many people get caught trying to cheat on this issue. Even if you are skilled enough to fool the blood tests, by abstaining for enough days to clear your blood of nicotine, if the policy gets issued, and you subsequently die, and they find out you lied, you WON'T get paid. Your family may only receive a refund of the premiums you paid.

I suggest that you'd have been better off without the coverage... at least then, you know that you didn't have it, and might go out an buy it. THINKING you have it, while not having it, is the worst of all worlds.

Bottom line: the insurance company has a right to know the person they are insuring. The prices are so low these days for competitive term life insurance, that there's really no reason to play games. If you lie, you're playing with fire.