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Why Honesty is the Best Insurance Policy

Blatantly lying or omitting the truth when discussing insurance coverage with your agent puts you on a slippery slope. You may be able to save a few extra dollars a month on your premiums for a brief time. However, if you get caught committing insurance fraud – highly likely since we live in an age that makes confirming information so simple – you not only could have a claim denied but could experience more extreme consequences.

Of course, not all lies to insurance providers are intentional attempts at fraud – some are errors of omission, which don't carry the same legal implications but can lead devastating coverage gaps. Following are some of the most common lies told to insurance agents:

White lies about auto insurance

Some untruths told to insurance agents can seem innocuous to policyholders but can have big repercussions. You should never lie about:

  • Who drives the car. If a policyholder’s 18-year-old son has a spotty driving record, one of the parents may say he or she drives the car instead or not list him on the policy to save on premiums. If the son has an accident, claims could be denied, leaving the policyholder on his or her own.
  • Where the car is parked. This could happen if you live in a neighborhood that’s considered high-risk for car break-ins and you lie to your agent and tell him/her that you park in a secure garage. If your car is burglarized, there'll be a police report on where the car was parked, and you'll have to explain the variation to your provider.
  • How many miles you commute and/or drive each year. This one is simple: The less you drive, the fewer opportunities you’ll have to be in a collision and the less you’ll pay for auto insurance. Knowing this leads to some policyholders bending the truth and telling their agents that they’re barely on the road.

Stretching the truth about home insurance

Many consumers also tell little fibs about home insurance in order to save a buck or two, but even the best laid plans can go awry. Common white lies include these:

  • Filling out a home insurance application and lying about your home’s value. The amount it would take to rebuild your home is one of the factors that determine how much you'll pay for home insurance. Lying about the value of the home could reduce how much you'll pay for coverage; however, it also will limit the amount you would receive in a claim.
  • Not owning up to having a dog. Telling your insurance agent that you have a dog could mean, depending on the dog's breed, that you must raise the amount of liability coverage in your policy. So by not telling their insurance providers, people think they’ll be able to skate by and maintain lower premium payments, especially if they’ve acquired a dog providers consider dangerous. The consequence: If the dog bites someone, the policyholder could be on the hook for the payout. Dog-bite claims average more than $32,000, according to the Insurance Information Institute.
  • Not telling your agent you have a pool or trampoline. Much like owning a dog, adding a pool or trampoline means your policy will need additional liability coverage in case a guest is injured or killed while using either addition. Again, lying about these will leave you on your own.
  • Not mentioning that you’ve recently added onto your home or renovated it. When you add onto your home or renovate it, you’re increasing the value of your home by upgrading it or increasing its size. These changes could mean that you’ll need more coverage for the physical structure of your home and/or the items you’ve added. The risk of not coming clean? Again, you won't be covered for the full cost of rebuilding the house should something happen.
  • Exaggerating the value of your belongings when filing a claim. Some policyholders inflate the value of their possessions when filing a claim in an attempt to get a higher payout with which they plan to purchase higher caliber replacements. This is outright fraud, and providers aren't stupid. Is it really worth it?

Bold, dangerous lies

Some criminals take insurance fraud to new levels. There have been cases where several people were in cahoots and staged the theft and wrecks involving a car in order to cover up existing damage and receive a higher payout for repairs; and people have intentionally set their homes on fire in order to collect from insurance companies, to name a few. Again, this is major fraud.

Insurance fraud is always a bad idea

Lying in any of these capacities and getting caught can result in you paying for medical expenses and/or property damage out of pocket as your claim likely will be denied or you won’t receive a large enough check to cover all costs. In the worst cases, you could pay steep fines or serve prison time.

Telling the truth is always the best bet. The amount of money you would save per month for telling white lies is negligible. Always get insurance that adequately reflects your home, car and possessions.

Shannon Ireland writes for HomeInsurance.com, an online resource for homeowners and drivers across the country. Offering comparative automobile and home insurance quotes, consumers rely on HomeInsurance.com for the most competitive rates from the top-rated insurance carriers in the country. The HomeInsurance.com blog provides fresh tips and advice on a range of financial topics to help homeowners and homebuyers make educated decisions about their insurance purchases.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

HomeInsurance.com

HomeInsurance.com is an online insurance resource for comparative auto and home insurance quotes across the country. HomeInsurance.com provides homeowners, renters, and drivers with comprehensive tools, tips, and resources on insurance. With topics ranging from home and auto safety to personal finance and lots of subjects in-between, the HomeInsurance.com blog offers advice that matters.

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