Everyone stretches the truth from time to time, and sometimes it’s harmless, but other times it’s not. When you’re applying for insurance your broker or agent is going to ask you a lot of questions, sometimes the questions seem too personal or even annoying, and they’re also going to make you wonder why they’re even asking them. Ultimately, the reason so many questions are being asked is because they are rate-able criteria that will affect the outcome of your premium for better or for worse, and knowingly telling a lie could get you into hot water.
In order to save the most amount of money on insurance, consumers will either knowingly misrepresent a fact, or more innocently just forget to mention a detail that perhaps they didn’t think was relevant. Either way, the consequences of lying on an insurance application, or lying to an insurance company during a claim can be serious, and could result in your policy being cancelled or voided.
For example, a 2016 survey of 3,000 consumers by CoverHound showed that 51 percent of consumers provided inaccurate information during the auto application process. It’s also worth noting that within these 3,000 consumers, it was determined that baby boomers were more truthful then millennials, homeowners were more accurate than renters, and the uninsured drivers were more accurate than the insured drivers.
Most common home insurance lies
- Disclosing if you have a fireplace – this heat source could result in an additional charge on your policy.
- If you have a dangerous dog or dog breed – some companies will not insure you, or they’ll show a surcharge.
- Any at-home businesses – you can have a business at home, but it needs to be properly underwritten.
- Renovations or repairs – large renovations could be outside the scope of your policy, disclose them to your broker.
- Use of the home – if your home becomes vacant, unoccupied, or is being used for short term rentals.
Most common auto insurance lies
- Not reveling any pre-existing damage to your vehicle – pre-existing damage could result in fraudulent claims.
- Drivers in the household – declaring someone else is driving the vehicle in order to save money.
- Usage for the vehicle – if you lie that the vehicle is just used for pleasure, but it’s used for work/commute.
- Insurance infractions – being cancelled by your insurer for non-payment or fraud is a rate-able infraction
- Current infractions or accidents – accidents or tickets will typically surface on your driving reports, so lying about them at the application process will just impact your moral character and your premium after the policy is issued.
Why not lie? What are the consequences
Besides putting you at risk of being denied your claim, not getting paid properly, or having your insurance rates increase after the insurance company finds out about the things you did not declare, you could end up being uninsurable or uninsured.
An insurance company could review your claim and the new information and decide to retroactively charge you the proper premium that they would have charged in the first place before they pay out a claim. Although this is better than having a claim denied, you still end up paying. After the claim, if the insurance company feels you have been dishonest or are a moral risk, you could have your insurance policy canceled. Once a policy has been canceled by an insurer, you usually have to declare this to future insurers and having this on your record will cost you more – it could impact you more than even an at-fault accident.
The intention of this post isn’t to scare you about your insurance policy, or suggest that insurance companies are in the business of constantly denying claims, but rather to make you informed of what could happen in the event of an untruthful disclosure of information. At HMS Insurance we want you to be properly covered for major financial losses, and having a truthful discussion at the application process is always a good start.