Ace the Chartered Life Underwriter Challenge 2026 – Secure Your Success and Dominate the Exam!

When an applicant intentionally lies on an insurance application to obtain a lower premium, this behavior is classified as fraud. Fraud involves a deliberate act of deception with the intent to benefit from that deception, often at the expense of another party. In the context of insurance, this can include providing false information about one’s health, lifestyle, or other risk factors to reduce premium costs.

This action is considered severe because it undermines the principles of honesty and transparency that are fundamental to the insurance industry. The insurer relies on the accuracy of the information provided in the application to assess risk and determine appropriate premiums. Engaging in fraudulent activity can lead to significant consequences, including the denial of claims, cancellation of the policy, and potential legal repercussions.

In contrast, misrepresentation typically refers to providing incorrect information, which may not always be intentional. Negligence pertains to failure to exercise due care, which is not relevant in this situation since the act was intentional. Inadvertent error implies that the mistake was unintentional and accidental, further distinguishing it from fraudulent behavior. Therefore, the most accurate description of the applicant's action in this scenario is fraud.