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Dishonesty and Car Insurance Policies

If drivers have one thing in common, it is that we all want low car insurance rates. Taking advantage of the discounts car insurance companies offer and maintaining a good driving record could go a long way towards saving on car insurance.

While these are good, honest ways to lower your rates, some customers choose to hide information or lie on their car insurance applications in an attempt to get cheap car insurance.

It may be tempting stretch the truth with your car insurance provider, but it can lead to negative consequences. 

How Car Insurance Rates Are Determined

It is important to understand how car insurance rates are determined in order to know how and why people would lie on their applications to get lower rates.

Your car insurance is typically determined using several rating factors that include the following:

  • Your driving record and the driving records of each additional driver you wish to add to the policy.
  • Insurance claims history.
  • Credit history.
  • Your car’s year, make, and model.
  • Primary parking location of the car.
  • Average miles driven per day.
  • Your age and gender.
  • Your marital status.

The above rating factors are examples of the most common car insurance rating factors. Some states restrict insurance companies from using certain factors to determine car insurance rates. These restrictions generally apply to credit history and gender.

Common Lies Told by Applicants

When applying for car insurance, a driver might not tell the truth regarding some of the above rating factors. When an applicant deliberately lies on his application to save money, this is considered “soft fraud.”

Car insurance agents see certain misrepresentations more often than others. Often, applicants intentionally (or unintentionally – e.g., because they forgot) give false information regarding the following:

  • The number of traffic violations or accidents on the driver’s record.
    • Having tickets, at-fault accidents, or other violations can increase your rates. Some applicants may lower the number of violations they’ve had in order to try to obtain a better quote.
    • NOTE: Background and driving record inquiries can easily check this information.
  • Where the driver parks.
    • Parking your car in a garage rather than out on the street can save you money on car insurance
    • Some applicants will lie about keeping their car in the garage, even if they don’t own a garage.
  • Miles driven.
    • Driving less means you face fewer risks, which ultimately means cheaper car insurance rates.
    • Applicants will often lie by giving a number significantly lower than their actual average miles driven per day.

Remember, with the Internet, checking accuracy on the facts you provide is relatively simple. Always assume your information will get verified and give accurate information.

If you can’t remember a piece of information, don’t make up facts. Try to gather all the necessary information before getting a quote.

Effects on Your Policy

Most states have laws regarding when an insurance company can or cannot cancel your policy. Lying on an application is typically considered grounds for cancellation of your policy, but typically only if the information is material, meaning the information can affect the decision about whether to insure you.

Keep in mind that most states require you to have car insurance if you are driving your car on public roads. A cancellation of your policy would cause a lapse of car insurance coverage and you could be in violation of law if you operate your car while it is uninsured.

Dishonesty and Car Insurance Claims

As stated earlier, it isn’t always easy for car insurance companies to know if you are being truthful on your application. They cannot check every detail, such as where you park your car overnight. However, this can change if you need to make a claim on your insurance.

If, for example, you have comprehensive car insurance and you need to make a claim because your car was damaged in a hailstorm, you may find that your insurance company will investigate this claim.

If they find that you park your car out on the street when you stated in your application that you park it in a garage, they can deny that claim. You will responsible for paying all the repair costs.

If your car insurance company finds out you gave false information in your application, and they do not cancel your policy, you might experience a hefty rate increase.

Honesty Really Is the Best Policy

Lying to get a better rate can be tempting, but it does come with consequences you don’t want to face. Car insurance companies also pass any costs they face due to lies on to other customers. So in an attempt to get discounted rates, you actually contribute to the increased rates for everyone.

Taking advantage of car insurance discounts and driving safely is a much better way of saving on your policy.

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