Slightly more than half of all applicants for auto insurance don’t tell the truth when they ask for a quote, according to a 2016 survey of 3,000 consumers by insurance marketplace CoverHound.com.
Certainly, car insurance is expensive, and in one survey, almost two-thirds of the drivers who submitted false information to insurers said they did so to save money. The average cost of car insurance in 2015 was $889, a rise of 61% from 1989, when the average cost was $552, according to the Consumer Federation of America. The average state increase over that time period was 75%. In 2017, the average price rose to $1,004.68, and the cost in a number of states was well over $1,000 per year. By 2020, the average cost of car insurance was $1,416, according to a study by U.S. News and World Report.
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.
- 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 being slapped with a higher premium, losing your insurance policy, or incurring civil fraud penalties.
How Errors Happen
Not all mistakes on a car insurance form are intentional. You may simply not remember, for example, how many miles you drove your car the previous year and enter a guesstimate. But whether your errors are intentional or not, if you have to file a claim—for an accident, say—the insurance company likely will find out. Claims investigators make an effort to verify whether the application was accurate. The problem then is that you stand to get your policy rescinded and may be subject to civil fraud penalties.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. In 2017, there were roughly 6.45 million crashes in the U.S., and the nation had 221.71 million licensed drivers. That means a driver has about a 3% chance of getting involved in some kind of accident 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, year out.
Men and women lie equally to insurers, and millennials are more likely to prevaricate than their elders, according to a report by Coverhound.com.
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.
The primary driver
Typically, this involves a parent claiming to be the one who uses the insured car the most, when in reality it is his college-age son. Young men have high premiums because they get in more accidents and are bigger risks.
The number of miles you drive
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.
How you use the car
Let’s say you use your car for work—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.
Where you actually live
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.
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.