When Does Your Lie Become an Insurance Fraud
Do you know what are the consequences of lying to your auto insurance company? And when does your lie become an Insurance Fraud?
In the United States, it’s required to have auto insurance if you own a vehicle. There’s only one state that auto insurance is not required that’s New Hampshire, but the drivers will have to prove that they can afford the damages. Insurance is a big expense in our lives, so you may think that with lying you could save couple bucks. Yes but, you can lose a lot more if the unexpected happens. Usually, people tell their insurer wrong parking addresses, somewhere that is quieter and a lower risk area (Parent’s Home, Sister’s Home). Yes, you could save up to 40-50 percent, but here’s the deal. Lying in the present to save money leads to future expenses and trouble that far outweigh any financial savings.
Below, you will find the most common lies people tell auto insurance companies and the consequences.
Why Would You Lie To Your Car Insurance Company?
Insurance companies give you a rate based on your financial risk. Why does this matter? It matters because they’ll ask you a lot of questions to determine how much financial risk you pose to the companies. Some questions are fairly easy and basic like what’s your address, vehicle/model/year, birthdate, occupation, or marital status. Others can be more specific like if you have a special paint job or something modded on your car, also if you had accidents or tickets in the past (usually 3 to 5 years) and the exact dates when they occurred
Many people don’t have all of the information needed to apply for an auto insurance policy at their fingertips, and if you’re searching for an insurance rates comparison tool like Insurox, sometimes you might put guessed answers and not the specifically correct answer. But if you’re looking to get accurate quotes, and to speed up the application process, it’s better to make sure every piece of information you give to the insurance company is correct. They will definitely verify what you tell them, and if false information is found, they may charge you a higher rate—or even cancel your policy altogether.
Most Common Lies People Tell Their Insurance Company
It’s possible to make it through the application process with the insurer by lying, but you’ll only slow yourself down. A few examples:
- When applying for insurance, you tell the agent that you have a Corvette Stingray but you actually have a Corvette Grand Sport a price difference of over $10,000. Maybe you want it to take advantage and save more money but you’ll just end up losing time and all of the rates you got will change. Because all of the insurance companies check your’s car VIN number. So all of that was for nothing.
- You might think that your credit history is excellent which maybe it was. But maybe something happened and your credit score dropped or vice-versa. You have to know your accurate credit score. Why does this matter? Because people with bad credit can pay double compared to the ones with good credit.
- Every auto insurer will run your license number for history about tickets and past claims. So no need for false information here, just don’t waste your time.
In the end, it’s unlikely to have any serious consequences with these types of lies. Mostly because they are instantly recognized and you may end up just paying a higher rate. But if you manage to purchase a policy based on a lie, you could be in serious legal problems. More on that bellow.
Which Lies Can Backfire After Drivers Have Purchased a Policy?
Other types of lies might seem effortless to get away with, and the consequences are unlikely to be immediate. A few common ones:
- Giving a wrong parking address. Example somewhere that is a lower risk area, lower traffic area. Because the zip code has a big impact on the rates, so consider this as insurance fraud.
- Who is going to drive your car? You’ll probably avoid putting your roommate, friend or relative with a poor driving record on the policy, just to keep your rates lower. But don’t forget that this is also a isnurance fraud, that can backfire later.
- Marital status. Men, often, get big discounts–up to 10%–just for being married. So you might tell a potential insurer your live-in is really your legally-wed.
During the application process, the insurance company will not send a detective to verify where you actually park your car. They aren’t going to hide and spy to see who else drives your car. And you don’t submit a marriage license with a policy purchase. But if you get into an accident, or you need to make a claim for vandalism or weather-related damage, or even if you use your insurer’s roadside assistance, lies like these can be easily uncovered. If you’re making a costly claim, you can bet your insurer will investigate.
Many of the auto insurance companies have Special Investigative Units who are assisted by law enforcement. Investigators will look exactly at your financials, social media accounts, and legal documents. And may even interview people close to you, making lies like the above fairly easy to uncover.
Lying To Your Auto Insurance Company Can Result in These 3 Consequences
Insurance fraud can costs insurance companies billions of dollars yearly, so you can be sure they’ll come down hard on violators. Licensed insurance experts at Insurox say there are three main lines of defense auto insurers have against dishonest customers:
- Policy cancellation
- Claim denial
- Premium Increases
Any of these consequences can happen (with a legal reason), and it will probably happen when you’re most vulnerable. Like after an accident or during the claim application.
One last thing: any kind of fraud (including auto insurance fraud) has legal consequences in the United States. If you are caught doing fraud you may be facing some pretty big fines, probation, community service, or even jail time.
Walking a Fine Line Can Save You Money
If you’re lying to your insurer (intentionally or because you mixed up some information), it’ll cost you. However, while you must answer the questions, insurers ask you honestly and provide all appropriate information, there is such thing as too much of a good thing.
For example, when you are applying for a new insurance policy, the agent will ask you if you’ve had any tickets in the last three years. You have to tell them if you have or not, but you don’t need to tell them about a speeding ticket you got 7 years ago. Similarly, once you’ve got your policy and you get a speeding ticket, you don’t need to call your insurer and tell them. They’ll probably find out on their own and bump up your rate.
The point of the story: check all of your vehicles, driving, and demographic details thoroughly before asking for auto insurance quotes. And definitely before signing onto a new policy–and don’t lie! It just isn’t worth the financial risks insurance is intended to protect you from.
Lastly: if you don’t understand something in the insurance application, just ask. And as always, we’re here to help.