About 20% of consumers have lied when applying for a life insurance policy in order to get cheaper premiums, according to a survey by comparator Finder.

The 20% proportion of 1000 survey respondents could equate to more than 3.8 million Australians who have been less than truthful with their life insurers, Finder says.

It says men (29%) were more likely than women (11%) to fill in false details in their application forms.

About 9% of the respondents say they lied because they have a mental health condition and a similar proportion say they did it to conceal their smoker status.

Around 8% did not want to state the true nature of their jobs, 7% lied about their alcohol consumption and 6% hid their pre-existing condition from life insurers.

The survey also found 41% have no life insurance.

Finder Insurance Editor James Martin says consumers run the risk of having their claims declined or even getting sued if they did not provide accurate information at the time of their application with insurers.

“Insurance premiums are based on the risk you represent,” Mr Martin said. “If you've previously lied about your circumstances when filling out your insurance application, your insurer could well void your claim.

“If you were to pass away, this could leave your loved ones in the lurch financially. In serious cases, you could even be sued for insurance fraud.”

Financial Services Council CEO Sally Loane says lying in life insurance application forms “could have serious implications” when a claim is made as it means the consumer may have breached their disclosure duty.

“Insurers are entitled to put the customer and the insurer back to the position had the misrepresentation never occurred,” Ms Loane told insuranceNEWS.com.au.

“This may result in the claim being declined or a benefit being reduced.”

She says the whole purpose of life insurance is to provide peace of mind, and customers need to know they can rely on their policy if they ever need to make a claim.

“This is why being honest when you apply for cover is so important,” Ms Loane said.

“When a customer makes a claim, the life insurer is likely to need to investigate the person’s health, and in doing so might well find any misrepresentation the person made in their application for cover.”

FSC says there were 10.9 million life insurance policies providing death cover as at December 31 last year.

There are another 8.8 million policies providing cover for total and permanent disablement (TPD), 4.9 million policies for income protection and 1.1 million policies for trauma.