Wednesday Oct 1, 2014

Lies and Half-Truths: Falsehoods People Tell Their Auto Insurers

5 August 2011

It’s understandable. Consumers want to lower their car insurance rates as much as possible. For many, the most effective short-term solution for doing so is to lie to, or withhold information from, their insurers. But there are financial consequences involved. Insurance companies have numerous ways to uncover the truth, and are becoming increasingly savvy at doing so. If they discover you’re being less than forthcoming about key information, they may cancel your insurance policy which will cause a lot of financial strain on your wallet especially when you try to look for another insurance carrier.

Clearly, it pays to be honest. With this in mind, we’ll present several common lies that consumers tell their auto insurers. If you’re tempted to bend the truth, even slightly, in the following areas, it’s important to understand the risk.

“Flexible” Interpretation of Car Usage

Your premiums are based on several criteria, including the vehicle you drive, where you live, and the average number of kilometers you drive each year. These and other factors are used by your insurance company to determine the risk associated with insuring you. An important component in this formula is the manner in which you use your car.

For example, suppose you run your own company, and your work requires you to transport heavy items on a regular basis. In addition, your business requires your employees to use your vehicle for the same purpose. Your insurer may consider these circumstances to present a greater risk of insurance loss than would be the case for a typical policyholder. They will adjust your premiums to reflect the risk. If you withhold these details and cause an accident, you may find your claim denied.

 iStock 000010485037XSmall 300x199 Lies and Half Truths: Falsehoods People Tell Their Auto Insurers

Fewer-Than-Actual Kilometers Driven Each Year

The fewer kilometers you drive each year, the lower your rates. The reason is simple. From the point of view of your insurance company, the fewer kilometers driven will mean the less exposure to potential accidents. And that translates into a lower likelihood that they will have to pay for claims.

For this reason, your insurer will ask you to provide the average number of kilometers you drive each year. Although there’s a strong temptation to lie, think twice before doing so. If you are involved in a collision, and your odometer displays kilometers which are inconsistent with the number you provided your insurance company, they may reject your claim.

 

Neglecting To List Drivers on Your Policy

Sometimes, it’s due to forgetfulness. Other times, it is a deliberate attempt to hide the fact that multiple people are driving the insured’s vehicle. Depending on the circumstances, an extra driver or two can cause your rates to climb. It’s understandable that many people are compelled to withhold this information.

Policyholders are responsible for informing their insurers about those who are driving their cars. For example, if there is a teenager in your home, and he or she uses your vehicle on a regular basis, tell your insurance company. Otherwise, they may refuse to cover damages if your teen causes an accident.

 

Where Do You Actually Park Your Vehicle?

Insurers consider where you live when they calculate your premiums. Every location varies with regard to the number of accidents that occur, as well as incidents of auto theft and vandalism. The more the likelihood of these occurrences is happening where you live, the greater the risk your insurance company will experience due to future claims.

Here again, it’s tempting to “forget” to inform your insurance company when you relocate to a less-than-ideal area. But if they discover the ruse, they might withhold compensating you financially when you submit a claim.

 

Speeding Tickets and Other Traffic Violations

If you receive a ticket for speeding or any other traffic violation, you’re not required to inform your current insurer. But realize that they will eventually become aware of them. Insurance companies routinely pull their policyholders’ driving records to ensure their rates reflect their recent history. If there are tickets or convictions currently on your record, they will not remain hidden for long.

The takeaway is that lying to your auto insurer in an attempt to keep your rates low is always a short-lived strategy. Your insurer will eventually find out and you will pay the costs financially. A more effective, long-term method is to shop around for low insurance rates each time your policy is about to expire.

Written by Natasha Carr @ Kanetix.ca your online resource for shoppers looking to compare insurance quotes, credit cards and mortgage rates. Kanetix offers consumers a better way to shop around by providing more quotes and more choice, giving Canadians more opportunities to save money.

 

About the Author

Bank Guru

My real name is Banking “Guru” Smith, yes my parents were bankers and believed that I one day would become a famous banker just like them. I enjoy a double-double coffee, super long lines at the grocery store and annoying CSR’s (Customer Service Representatives or more commonly known as ‘Tellers’). You will usually find me working behind the scenes, I let Sensei generate all the attention. I also forgot to mention that I invested in Madoff, think I will ever get my money back?
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