The truth doesn't hurt

Millions of Australians have told a fib in order to get a discount on their life insurance policy, according to new research by Finder. The national survey found 20% of Australians, equal to over 3.8 million people, have lied in order to get a cheaper policy.

Being a smoker is one of the biggest reasons for misleading a provider (9%), as is mental health (9%). This is followed by the nature of one's job (8%), alcohol consumption (7%), a pre-existing condition (6%) and hobbies such as extreme sports (4%).

When it comes to our personal finances, being open and honest pays off. Whether you want to call it gilding the lily or pulling a swifty, insurance is one area where painting a less than accurate picture can leave you out of pocket potentially with zero benefit.

Lying on life insurance applications can be especially dicey. Premiums are based on the risk you represent. If you’re not 100% honest with an insurer, any claims can be rejected. That can mean a waste of the money spent on premiums, as well as leaving your family in the lurch financially if something happens to you.   

Sure, coming clean with an insurance company – for any type of policy, can mean paying a higher premium. But that’s got to be better than paying good money for a policy that’s worthless because you weren’t entirely upfront.

The temptation to stretch the truth isn’t limited to insurance. I’ve also come across research that shows close to one in three home buyers can fudge their home loan applications. In today’s rapidly rising property market, fear of missing out may make it tempting to bend the truth on a loan application. However, the reality can be living with a loan you really can’t afford, and that can be a path to financial stress.

With millions of Australians likely to complete their tax returns over the weeks ahead, sticking to the facts pays here too. The Tax Office uses sophisticated data matching technology that can show in a flash if you’ve underestimated income or fudged other aspects of your tax return.

In fact, the tax man is urging Australians to hold off slightly on lodging tax returns this year. It can take time for employers, banks, private health insurers, and government agencies to compile the details needed for the Tax Office to electronically cross-check details on your personal tax return. The pandemic means some  of these details may not be finalised until late July.  

Waiting a week or two can mean the prefilled aspects of your tax return are accurate, helping you get the right refund sooner. That’s a far happier outcome than copping a ‘please explain’ from the Tax Office if something isn’t quite right with your tax return.

Paul Clitheroe is Chairman of InvestSMART, Chair of the Ecstra Foundation and chief commentator for Money Magazine.