What happens if you lie on car insurance

Sometimes people think it's acceptable to withhold facts or give incorrect information to their insurance company. Often, the motive is simply to save money. Other times, consumers may think they've paid high premiums in the past and haven't made any claims, so the insurance company owes them something.

The truth is that withholding information from your insurance company or providing false information is a poor idea. It's fraud. And it will not have good results. If you haven't been honest with your insurance company about basic facts, it needs to know in order to issue you the right policy at the right premium. If you lie, you'll face serious consequences when the truth comes out, including:

1. Your insurance policy could be cancelled

If your policy is cancelled, you'll likely have to pay more to get a new policy elsewhere. Policy cancellation for non-disclosure puts you in a high-risk category. Being in a high-risk insurance category automatically makes it harder and more expensive for you to get car insurance.

2. Your claim will be denied

Let's say you tell your insurance company that you don't drive your car to work every day, but you really have a 50-kilometre commute each way. If you get into a collision during your commute, the company may deny your claim because you didn't tell them the truth about your daily driving habits.

3. Your insurance premium will go up

Insurance companies provide policies and charge premiums based on the information you provide. If you drive a lot or have had accidents in the past, they believe this increases your risk of a future accident. If you didn't disclose problems in the past and the company learns of them, your premium will go up, because the company will have a more accurate picture of your potential risk.

4. You could be denied car insurance in the future

When your insurance company learns that you’ve been dishonest with them, whether it's because of a claim you make or other means, it can have a more significant effect on your premium than if you told the company from the beginning that you've had an accident or tickets.

The insurance provider is within its rights to deny your car insurance in the future.

5. You could face fines and penalties

You may have to pay money to your insurance company or receive a fine under your province's insurance regulations. The amounts vary, but if a claim was paid under fraudulent circumstances, you could be held financially responsible for it. An insurance company can sue you to recover costs and damages under the law.

6. You could face criminal penalties

A false insurance claim can lead to jail, substantial fines, and a permanent criminal record.

Lying to your insurance company could seem like a good idea at the time, but in reality, it's a form of insurance fraud. According to the Insurance Institute of Canada, customers pay 5% to 15% more for their auto insurance premiums because of insurance fraud than they would otherwise pay. Car insurance fraud costs Canadian taxpayers more than $1 billion a year, and it could be higher according to some industry estimates.

There's a better way to save money on auto insurance premiums than lying to the insurance company: use InsuranceHotline.com to find your best rate.

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.

Key Takeaways

• 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 abouta 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.

Common Omissions

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.

Do insurance companies know when you're lying?

What happens if you lie to the crash?