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.
o 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.
o NOTE: Background and
driving record inquiries can easily check this information.
• Where the driver parks.
o Parking your car in a
garage rather than out on the street can save you money on car insurance
o Some applicants will
lie about keeping their car in the garage, even if they don’t own a garage.
• Miles driven.
o Driving less means you
face fewer risks, which ultimately means cheaper car insurance rates.
o 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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