It does not matter whether you are filling out a financial services application or an insurance application for your first or tenth time. Pay attention. Applications matter. That is especially the case when the representative you are dealing with says that they aren’t really that important or that the representative will fill out the application for you. Here’s why.
We all know about the untimely death of Michael Jackson. According to news reports, an insurance company has refused to pay a policy for a large amount because the insurer now claims that Michael Jackson allegedly lied on his insurance application. His estate stands to lose significant benefits if the carrier can prove that at the time he completed an application Mr. Jackson knowingly provided false information.
In another case, a landlord filed an insurance application with misstatements. An apartment fire killed a tenant, and a massive lawsuit against the landlord resulted. The insurance carrier asserted that the application was a fraud and refused to provide the contracted coverage.
Accurate applications matter today more than ever. There was a time that a mistake could be overlooked. That is not true in today’s economy.
When you fill out an application, there is usually a verification just above your signature that all the information is truthful, complete and accurate. It provides that you represent these things under oath. It will also likely provide that if there are misrepresentations or false information the application is void.
You buy financial services and insurance to protect your family, yourself and your assets. You pay your premiums. You expect that you have purchased safety and security. But if you have misstatements in your applications, you may not get what you paid for.
This brings us to unethical agents. They will sometimes fill out applications for applicants and tell them not to worry about the details. Sometimes an unethical agent will ask the applicant to sign the form in blank and he or she will complete it. Sometimes applicants will ask about disclosures they should make, only to be advised by the agent to change the answer or to not provide information.
A financial services company or an insurer that can prove a knowing and material misrepresentation in an application can refuse to provide benefits for which you contracted. If you think that you will defeat the refusal by claiming that you were told to make a misrepresentation by an agent, it may not be that easy. Certainly, a company is bound by the actions of its agents. But, it just may be your word against the agent’s. And it will be your application with your signature that will be at issue. This is a problem you should avoid.
Accurate completion of a financial services or insurance application is an important ingredient in your investment strategy. Why? The insurance company or the investment company needs accurate information to properly consider your application, to evaluate the risk, and to determine your proper level of investment risk tolerance.
A false, mistaken or fraudulent application is like a ticking time bomb. Financial services and insurance companies often try to impress you that they have sophisticated fraud detection units. They try to sell you services and products based on the fact that those armies of highly skilled investigators are for your protection. Don’t believe it. From time to time, some investor or policyholder may benefit from the work of the fraud busters, but fraud detection units really exist to protect the financial services or insurance company against fraud by their customers. And that means you if you have material misstatements or misrepresentations in an application.
You pay premiums or make investments for years. Then something happens and you need your benefits. The company will then send its investigators to search for information to prove that the application was false. That will be the basis to refuse benefits. The simple answer is to make sure that you accurately complete the forms, disclose information and never sign forms in blank – no matter what an agent tells you.