Car insurance is certainly expensive. So it should come as no surprise that as many as 35.8 million people lied on their applications for auto insurance in the United States to get the best rate possible. That number represents about 14% of all Americans.
The average cost of car insurance in 2019 was $1,204, according to the most recent survey from the National Association of Insurance Commissioners. That number is up 18.71% from 2015. The median state combined average premium amounted to $1,096 in 2019. Keep in mind, though, that every state has different criteria when setting premiums, including underwriting, traffic, theft, accident rates, and others.
Rates are set using a range of factors other than one's driving record. People often are asked, for instance, to provide their credit history, the average number of miles they drive, and their vehicle’s year, make, and model. The goal of providing false information—to make oneself look like a better driver and one's car appear to be a better risk—may be tempting to try and push insurance premiums lower. But it’s one that’s fraught with its own risk: being found out.
- Millions of Americans lie on their car insurance applications to get better rates.
- Motorists may try to cover up traffic tickets, accidents, and more that could make them pay higher insurance rates.
- Insurance companies often discover the truth when an insured person files a claim.
- The consequences of being found out may include higher premiums, loss of insurance, or fraud charges.
- Look for ways to save on your premiums, including shopping around and raising your deductible.
How Errors Happen
Not all mistakes on a car insurance form are intentional. For instance, you may simply not remember how many miles you drove your car the previous year and enter a guesstimate.
Whether your errors are intentional or not, if you have to file a claim—for a crash, say—the insurance company will probably find out. Claims investigators make an effort to verify whether the application was accurate. The problem then is that your policy may be rescinded and could become subject to civil fraud penalties. At the very least, your premium will go up.
On the surface, the odds that your car will run into trouble seem small. There were 276 million drivers in the United States as of 2019. In 2020, there were roughly 5.25 million crashes in the U.S. That means a driver has about a 2% chance of getting involved in some kind of crash every year. Also, your car may be stolen or vandals may trash it. The question is whether you want to trust in luck, year in and year out.
Men are more likely to lie about their car insurance history than women. Roughly 20% of men lied to their car insurers compared to about 9% as of 2021.
Here are some common omissions and untruths that may result in a lost policy, inability to get new coverage, fines, a legal order to pay back premiums—or even jail time.
- Accidents or Tickets: This is the easiest thing for insurers to look up, regardless of what state you live in. The fender bender you sustained on the West Coast did not vanish from databases when you moved to New Jersey. Although that speeding ticket you got may seem like ancient history, the insurance carrier isn't likely to sympathize.
- Primary Driver: This typically involves a parent claiming to be the one who uses the insured car the most when in reality it's their college-age son. Young men have high premiums because they are considered a bigger risk than other age groups. To put it bluntly, they get into more crashes than anyone else.
- Mileage: The more time a car spends on the road, the greater the likelihood it will be involved in an accident. Often, a motorist will claim the daily commute is shorter than it really is. That can make explaining what happened more difficult when you smash up the auto a greater distance from home.
- Car Use: Let’s say you use your car for work like delivering pizzas or hauling tools to make home repairs. But you tell the insurer that the vehicle is solely for shopping and recreation. When you get in a wreck on the interstate and the police report notes the dozens of pizza pies splattered all over the car’s interior, it doesn’t look good to the insurance company investigating your claim.
- Primary Residence: If your home is in a high-crime area or big city, you might be inclined to list your sister’s address as yours. She lives in a peaceful suburb, which statistics show has a lower chance of a car being stolen or damaged. That lie is very easy to disprove.
What Happens If You're Caught?
Lying about your history or circumstances on your auto insurance application may seem innocent enough. After all, what's the harm? And who's going to know? It may go unnoticed for a while, but it can catch up to you in the long run. And there are serious consequences if it's determined that you misled your insurance company—intentionally or not.
Making false statements on your application is considered fraud. It costs insurance companies billions of dollars each year, which means rates in your state end up rising, too. If you're caught, your policy may be canceled and you may have trouble finding a new insurer. In other cases, you may be slapped with higher premiums. In the most extreme cases, you may have to pay fines and penalties or you could be subject to jail time.
The best way to avoid this is to be upfront and honest. If you notice an error in your policy and coverage, report it immediately to your insurer. If you want to save, follow these tips:
- Research insurance before you buy a vehicle
- Shop around for the best rate possible
- Raise your deductible (which lowers your premiums)
- Take advantage of bundling
- Look for discounts
- Ensure you have a good credit score
What's Wrong With Lying on My Car Insurance Application?
Lying on your car insurance application may seem harmless but there are implications for everyone involved. Car insurance fraud costs insurers billions of dollars. This is passed on to consumers who end up paying higher premiums.If you get caught, your policy could be canceled and you could be denied further coverage. You may also face fines, penalties, and even jail time.
What Are the Repercussions of Lying on Your Car Insurance Application?
Auto insurance fraud often leads to a policy cancelation. Furthermore, you may find it difficult to find coverage in the future. Even if you do, your premiums will rise. In certain cases, you may be subject to prosecution, which could lead to fines, penalties, and even jail time.
How Do Auto Insurers Know When Someone's Lying?
Lying to your car insurer is commonly referred to as non-disclosure or misrepresentation, and it doesn't go unnoticed. There are ways for insurance companies to know that you're not being honest about certain details. For instance, there are national databases your insurer can tap into that can tell it details about the tickets you got—even if they're in another state. If you get into a crash, your insurer will find out the extent of your mileage. And that nosy neighbor may report you if you live in one state and your vehicle is registered in another.
The Bottom Line
Not being honest with an auto insurance company may seem harmless, and the payoff in lower premiums may make the lie seem worthwhile. But there are better ways to keep your premiums low, such as bundling your auto and homeowners insurance policies with one carrier or increasing your deductibles.