Misrepresenting Car Insurance Information

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 28, 2021

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Here's what you need to know...

  • Material misrepresentation occurs any time you falsify information about yourself
  • In some cases, this misrepresentation can lead to a loss of insurance coverage, a fine, and even time in jail
  • Even if you accidentally omit information about yourself, it is still considered misrepresentation
  • If your insurance company discovers you have misrepresented yourself but chooses to continue carrying your policy, you can expect higher rates

When you apply for car insurance, there are many questions that the insurance company will ask you. “Material misrepresentation” refers to someone falsely reporting important, or material, information.

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If you falsely report anything on your insurance application, you can be punished in a number of ways.

This article will talk in more detail about misrepresentation and what can happen if someone lies on an insurance application.

Is material misrepresentation common?

happens a lot more than you may think.

Some people do it on purpose while others may unintentionally leave information out, especially if it was something minor.

In either case, it is considered material misrepresentation if you lie or exclude information.

If you do carry out material misrepresentation, it can mean have consequences for your current and future car insurance needs.

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What kinds of things comprise car insurance material misrepresentation?

There are several things that are considered material misrepresentation. This misrepresentation refers to anything that would impact your insurance policy and cause it to be a higher rate.

One way to misrepresent yourself is by lying about certain features of your vehicle.

Insurance companies will usually charge you a lower rate if you have certain anti-theft or safety features in your vehicle.

If you tell the insurance company that you have these features, but you don’t, that is considered to be a material misrepresentation.

Another factor that the insurance company uses to determine your insurance rate is where you keep your car.

If you park it on the street or open parking lot, there is a bigger chance that it will be vandalized or broken into, so insurance companies charge you a higher rate.

If you park it in a garage, your rates will often be lower. If you lie about keeping it in a garage, when you don’t, that is considered a material misrepresentation.

Other things considered material misrepresentation include lying about your driving record, marital status, DUI arrests, the number of traffic violations you’ve received, and a past criminal record.

What is considered “material fronting”?

“Fronting” is the practice of insuring someone else’s car in your own name to prevent the other driver from having to pay higher insurance premiums.

Most often, this practice occurs when parents take out insurance policies on behalf of their minor children rather than adding those children to their existing policy.

In a legal sense, fronting is the same as a material misrepresentation. However, from the insurance company’s perspective, it’s a separate issue which can be handled in different ways.

Regardless of how your insurance company treats fronting, it is still illegal and allows them a certain amount of recourse. Therefore, if you are a parent and have minor drivers still living in your household and driving your vehicles, they need to be added to your policy.

Other adults living in your household must also be added to your policy if they regularly use your vehicles. Otherwise, they are required to procure car insurance of their own.

What are the consequences of carrying out material misrepresentation?

Depending on the severity of the misrepresentation, there are a number of things that the insurance company may do.

Many times, an insurance company will choose to cancel your insurance policy if you have misrepresented yourself.

To cancel your policy, for this reason, the insurance company needs to meet four requirements:

  1. proving the misrepresentation
  2. proving that it is fraudulent
  3. showing that the misrepresentation was the reason the insured got coverage
  4. justifying the confidence of the material misrepresentation

In extreme cases, the insurance company could cancel your policy retroactively, which means that you would have been driving illegally for that amount of time and result in the suspension of your driver’s license.

If the misrepresentation was minor and didn’t cost your insurance company any money, your coverage will probably not be canceled, and you will still have coverage.

In most cases, however, your insurance rates will increase.

In some cases, if you were in an accident and the company finds out you lied on your application, you may be taken to court and will have to pay back any money that the insurance company paid out for the claim.

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How will material misrepresentation affect my future car insurance policies?

If you have been found to have materially misrepresented yourself when you applied for car insurance, there are a number of things that may happen. If your insurance company chose not to cancel your policy, your rates would still go up.

If your insurance company cancelled your policy, things will be more difficult for you.

This information is available to all insurance companies, so you may have trouble finding another company that is willing to insure you.

Since most states require that you have car insurance, you would not be able to drive.

Some car insurance companies may decide to give you a policy even though you have a canceled policy from another company. In this instance, you can expect to pay a lot more for your car insurance premiums.

The best thing you can do to keep your insurance rates low is always to be truthful when applying for insurance.

For more information about insurance rules and regulations you can visit the Insurance Information Institute website.

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