Charlotte Smith filed an auto insurance claim with her provider after her car skidded off the road and crashed into a barrier.   Her insurance company denied the claim, saying that on her application she failed to disclose the vehicle’s true garaging address

Implications of misrepresenting facts to an insurance company

According to a 2016 survey, about 51 percent of people omit or conceal some information in order to get the lowest car insurance rates.  But what are the ramifications of such misrepresentation? 

If an insurance company discovers mistakes or misrepresentations on your insurance application, whether they may be intentional or just an error, they usually compare the information you provide against motor vehicle data and credit agencies reports, and they often request that you clear up discrepancies by providing relevant legal documents such as your W-2, paystub, lease agreement, etc.

On the other hand,  they may simply offer you higher insurance rates to reflect the risk level of insuring you, or they can simply deny your application...

Grave misrepresentation such as an intentional attempt to defraud insurance may lead to legal.

Other misrepresentation and consequences

The most serious misrepresentation is the act of intentionally hiding or fabricating a material fact.  A common example of this type of fraud is “fronting”, in which one person insures another individual under his or her name to help that person get a cheap automobile insurance rate.  For instance, the parent of a teenage driver or a friend or relative of another driver with a poor driving record who purchases a policy under his or her name is committing material misrepresentation.

 You have to bear in mind that insurers are under no obligation to investigate the details provided by insurance applicants, but they do have the right to verify your answers on your application at any time, particularly when you file a claim.  Consequently, one of the most costly mistakes of giving false or misleading details is having your claim denied.

Still, insurers that reject a claim on the grounds of misrepresentation must be able to show that they asked you clear questions when they approved your application or renewed your policy.

Another possible outcome of material misrepresentation is the cancellation of your policy at any point during its term.  To cancel your policy, however, insurers are required by law, such as the Massachusetts cancellation law, to give you a written explanation at least 10 days before the termination date.

Most Common Types of Material Misrepresentations

Many false details on applications are unintentional, although “intent” does not count as a defense.  Here is a list of the most common misrepresentations that car insurance applicants commit:

  • Failure to disclose alteration to their cars.
  • Asserting that the vehicle will be parked in a garage when actually it isn’t.
  • Not disclosing other drivers who reside in the same household.  This misrepresentation becomes even more serious when it involves high-risk drivers (they have DUI convictions, frequent traffic accidents, or moving violations).
  • Concealing driving history (i.e., traffic violations and accidents), DUI conviction or other serious criminal offenses, and previous claims.

Other Misstatements that Could Raise Your Car Insurance

Mileage driven.  The number of miles that you drive yearly has a significant impact on your insurance risk. Some companies will actually decline coverage if your annual mileage exceeds a certain amount. Others will place a higher premium on your rate. In the past, carriers did not penalize consumers for miles driven as they do today. In fact, consumers were rewarded with discounts for driving less than 10,000 or less than 7,500 miles in a year.  But because of the popularity of ride-sharing, insurance companies now factor in miles driven since so many consumers use their vehicles for public transportation.

Adult child.  Another common error that can raise one’s premium is including an adult child in the policy even though he or she goes to college and lives on campus with no regular access to a car company offer that will allow you to add an operator who is away in school and not pay the full additional premium for an inexperience driver.

Auto safety features.  Failure to disclose your car’s anti-theft devices and other safety features will also prevent you from receiving some discounts on your auto insurance.

Paying an additional premium for misstatements or even misrepresentation can be avoided. Talk to us about how to obtain the cheapest insurance rates while providing factual information. Send us an email describing the claim or coverage issues you are facing, and we will offer you professional advice on how to get your claim paid or reduce your insurance rate.

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