Car Insurance Applications: What If You Lie?

Car insurance is unquestionably expensive. As a result, it should come as no surprise that up to 35.8 million people in the United States lied on their auto insurance applications in order to get the best rate possible. This figure represents approximately 14% of all Americans.

According to the most recent National Association of Insurance Commissioners survey, the average cost of car insurance in 2019 was $1,204. This figure is up 18.71% from 2015. In 2019, the median state combined average premium was $1,096. Keep in mind, however, that each state has different premium-setting criteria, such as underwriting, traffic, theft, and accident rates, among others.

Rates are determined by a variety of factors other than a person's driving record. People are frequently asked to provide their credit history, the average number of miles they drive, and the year, make, and model of their vehicle. The goal of providing false information—to make oneself appear to be a better driver and one's car appear to be a lower risk—may be appealing in order to lower insurance premiums. However, it comes with its own set of risks: being discovered.

How Errors Happen

Not all errors on a car insurance form are deliberate. For example, you may simply forget how many miles you drove in the previous year and enter an estimate.

Whether your mistakes are intentional or not, if you have to file a claim—say, for a car accident—the insurance company will almost certainly find out. Claims investigators make an effort to confirm the accuracy of the application. The problem is that your policy could be canceled and you could face civil fraud penalties. At the very least, your insurance premium will rise.

On the surface, the chances of your car breaking down appear low. In 2019, there were 276 million drivers in the United States. There will be approximately 5.25 million crashes in the United States in 2020.

That means that every year, a driver has a 2% chance of being involved in a crash. In addition, your car could be stolen or vandalized. The question is whether you want to rely on luck year after year.

Common Omissions

Here are some common omissions and lies that may result in a policy cancellation, inability to obtain new coverage, fines, a legal order to pay back premiums—or even jail time.

• Accidents or tickets: Regardless of where you live, this is the easiest thing for insurers to look up. When you moved to New Jersey, the fender bender you had on the West Coast did not vanish from databases. Although that speeding ticket may seem like a distant memory, your insurance company is unlikely to sympathize.
• Primary Driver: This typically involves a parent claiming to be the primary user of the insured vehicle when, in fact, it is their college-age son. Young men pay higher premiums because they are deemed to be a greater risk than other age groups. To put it bluntly, they have more accidents than anyone else.
• Mileage: The longer a car is on the road, the more likely it will be involved in an accident. A driver will frequently claim that their daily commute is shorter than it is. When you smash up the car a long distance away from home, it can be more difficult to explain what happened.
• Car Use: Assume you use your car for work, such as delivering pizzas or transporting tools for home repairs. However, you inform the insurer that the vehicle is only used for shopping and recreation. When you get into a car accident on the interstate and the police report mentions dozens of pizza pies splattered all over the car's interior, the insurance company investigating your claim is not impressed.
• Primary Residence: If you live in a high-crime area or a big city, you might be tempted to list your sister's address as your own. She lives in a quiet neighborhood where cars are less likely to be stolen or damaged, according to statistics. That deception is easily debunked.

What Happens If You're Caught?

Lying on your auto insurance application about your history or circumstances may appear to be harmless. What's the harm, after all? And who is going to find out? It may go unnoticed for a time, but it will eventually catch up with you. And there are serious consequences if it is determined that you intentionally or unintentionally misled your insurance company.

Falsifying information on your application is considered fraud. It costs insurance companies billions of dollars each year, which means your state's rates will rise as well. If you are caught, your insurance policy may be canceled, and you may have difficulty finding a new insurer. In other cases, you may face higher premiums. In the most severe cases, you may be subject to fines and penalties, as well as jail time.

Being upfront and honest is the best way to avoid this. If you discover an error in your policy or coverage, notify your insurer right away. If you want to save money, consider the following suggestions:

• Before you buy a car, look into insurance.
• Shop around for the best price.
• Increase your deductible (which lowers your premiums)
• Take advantage of bundling
• Look for discounts
• Make certain you have a good credit score.

Frequently Asked Questions

What's Wrong With Lying on My Car Insurance Application?

Lying on your car insurance application may appear to be harmless, but it has serious consequences for everyone involved. Insurance companies lose billions of dollars due to car insurance fraud. This is passed on to customers, who end up paying higher premiums as a result. If you are caught, your policy may be canceled and you may be denied additional coverage. Fines, penalties, and even jail time may be imposed.

What Are the Repercussions of Lying on Your Car Insurance Application?

Auto insurance fraud frequently results in policy cancellation. Furthermore, finding coverage in the future may be difficult. Even if you do, your insurance premiums will go up. In some cases, you may face prosecution, which could result in fines, penalties, and even jail time.

How Do Auto Insurers Know When Someone's Lying?

Lying to your car insurer is known as non-disclosure or misrepresentation, and it is not tolerated. Insurance companies can detect when you are not being truthful about certain details. There are national databases, for example, that your insurer can access to learn more about the tickets you received—even if they are in another state. In the event of a collision, your insurer will determine the extent of your mileage. And if you live in one state but your vehicle is registered in another, your nosy neighbor may report you.

The Bottom Line

Lying to an auto insurance company may appear to be harmless, and the payoff in lower premiums may make the lie seem worthwhile. However, there are better ways to keep your premiums low, such as combining your auto and homeowners insurance policies with the same carrier or raising your deductibles.