Insurance Articles by A-1 Auto Insurance
Submitting a False Insurance Application
If you have to apply for any type of insurance, it is often very tempting to lie or tell only part of the truth. You may believe that you will pay less for your annual payments or find it easier to have your application approved if you life. The problem is that the methods used by insurance companies to verify the information provided is more advanced and comprehensive. Therefore, it is much more likely that you will get caught if you submit false information on your insurance claim. If you are caught lying on your insurance application, you also risk having the insurance provider rescind your application. Even worse, you may be required to pay a fine that can be as high as tens of thousands of dollars if you have been proven to submit a fraudulent insurance application.
In addition to any fines that may be imposed by the insurance company, there are also severe legal penalties for individuals who submit false information on their insurance application. For example, according to Section 359 of the California Insurance Code, insurance companies in California have the right to regard your policy as invalid as soon as they discover you have submitted any false information or omitted any relevant details. This means that you will be left without any insurance coverage which could prove to be a very costly mistake.
Scott Edelen who is Deputy Insurance Commissioner of the California Department of Insurance also indicates that an individual may encounter much worse problems than merely having his or her insurance policy revoked. The person may also be held financially liable for submitting a false insurance claim. Just imagine what would happen if your policy ends up being rescinded after you have been awarded claim damages for an auto accident? If your claim was very costly, you could end up owing a large sum of money because you lied on your application.
Edelen recounts one such incident that occurred when a policy holder provided a false address when they submitted an insurance application. The individual’s motive was to obtain a less expensive rate of insurance. The policy had been approved and remained valid for several years with the incorrect address. However, the person’s insurance provider later determined that the address was false and rescinded the insurance policy. This was merely the start of the policy holder’s problems.
The insurance company investigated the situation more closely and discovered that a previous claim had been paid to the individual who submitted the false address. The claim concerned an accident with another driver who did not have insurance at the time. In addition to having his policy revoked, he was also sued for damages incurred throughout the life of the insurance policy. After losing the judgment, the policy holder was required to pay the claim costs that were paid during the existence of the policy with the incorrect address.
This person was also forced to pay the difference between the cost that would have been assessed if the application contained the right address and the cost of the actual policy. In addition, the individual had to pay interest on both of these outstanding amounts. To make a long story short, one small lie resulted in more than $20,000 in charges. This is a much higher amount of money than the person would have had to pay if they had submitted the correct address on the initial insurance application form.
If you are contemplating lying on your insurance application, remember that it will most likely be discovered by the insurance company. Sophisticated detection methods are making it even easier and faster for insurance providers to detect false insurance applications. The majority of insurance providers will not take the word of an applicant without applying some type of verification process to the information submitted. This ensures that the prospective policy holder’s rates and potential accident risk are assessed fairly and accurately.
According to Bill Sirola, a spokesperson for State Farm, insurance companies can easily verify the driving records of any insurance applicant in their home state. They can also use the Comprehensive Loss Underwriting Exchange (CLUE) as well as additional claims information databases to gain access to driving record information anywhere in the entire country. Insurance companies can check various details about a prospective policy holder’s driving; they can verify if an individual has ever been involved in an accident or traffic violation or received a ticket.
Most insurance companies will verify the past three years of your driving record when they are reviewing your insurance application. However, they will check to see if you have been involved in any driving offences such as driving while under the influence for a period of seven years. Organizations such as CLUE can also provide information such as whether individuals have ever submitted an insurance claim as well as the exact amount of such claims.
Given the advanced verification methods, organizations and laws currently in place, it is definitely not worth the risk involved to tell a lie on your insurance application. Even one seemingly minor omission or lie can come back to haunt you many years later. For example, if your insurance company runs a check with the Department of Motor Vehicles, they can quickly and easily determine if you have lied about your driving record. If you are caught, your policy may be revoked, your premiums may be raised or you may be fined. As with anything else in life, “honesty is the best policy” also applies when you are completing your insurance application.
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