Clean Sheeting – Definition

Cite this article as:"Clean Sheeting – Definition," in The Business Professor, updated January 26, 2020, last accessed October 20, 2020,


Clean Sheeting Definition

Clean sheeting is an illegal practice in insurance whereby an individual purchases a life insurance policy without discussing the pre-existing medical condition with the insurer. Clean sheeting is often done with the help of a third party which might be an insurance agent or broker. As an insurance fraud, clean sheeting is done to defraud the insurer, the policyholder receives coverage from the insurer without disclosing a pre-existing terminal illness or disease.

A Little More on What is Clean Sheeting

Policyholders who defraud insurers through clean sheeting achieve this by selling off their insurance policies through a viatical settlement after it has been accepted. The money realized from the sale of the policy is much lesser than the amount a legal settlement would have generated. Individuals who purchase this policy do so at a discount but there is a likelihood that the policy will be rescinded once its fraudulent attrite is discovered by the insurer.

In addition, the policyholder in a clean sheeting conceals a terminal illness he is suffering from the insurer. Clean sheeting is sometimes called ‘concealment’ in an insurance context.

To Tell the Truth

Clean sheetings are often successful when a policyholder has the help of an insurance agent or broker. In reality, insurance companies follow all due processes in ensuring that client gove the vital information needed in a life insurance policy. Some of the information that clients provide include medical report or history, family history, habits and, hobbies, among other contingent questions. This information can be provided online, via email and through phone calls. As part of the diligent procedures, insurers go the extra mile to ask follow up questions to be sure of any omission in the medical record provided by the clients. However, in the case of clean sheeting, concealing a terminal illness becomes easy when an agent has connived with a client to defraud the insurer.

Clean sheeting is also carried out by unscrupulous agents who convince their clients that telling little lies poses no harm in an insurance policy. The reason is that most agents are often concerned about the commission they will earn from this fraudulent process. If a policyholder, however, makes a claim in a contestable period, the inaccuracies and omissions in the policy will be detected which can lead to denial of coverage by the insurer.

An incontestability clause is often included in life insurance policies, this clause prohibits insurers from voiding the provision or coverage offered by the policy after a period of time has passed due to inaccurate statement made by the insured.

Reference for “Clean Sheeting” › Concepts › Finance and Economics

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