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Biggest Car Insurance Lies

Some drivers look at the whole experience of signing up for auto insurance as one big battle with the insurance company. They think of it as a challenge to do whatever they can to save money on their rates. In their effort to win, these competitive and unscrupulous individuals often resort to lying at some point or another to try to gain the upper hand. Misstating something on an auto insurance application might seem harmless to some, but it is dishonest and unfair to the rest of the insurance buying public that keeps the rules and plays right with the insurance companies. This is not to mention the fact that these harmless little lies can also come back to haunt them down the road.

Auto Insurance Premium Leakage

When a customer of a company selling insurance products is not honest with the insurer and this dishonesty leads to lower prices, the resulting lost revenue before filing a claim is known in the industry as "premium leakage." It refers to the inability of insurers to keep up with changes in customers' home lives that impact the cost of policies. Premium leakage is a huge problem across the industry. There are even companies out there whose sole purpose is to monitor the activities among customers that lead to premium leakage. They are in the business of making sure auto insurance consumers tell the truth.

These are the most common lies and misrepresentations told to auto insurance companies.

Underestimating Miles Driven

Many people do not actually keep track of their mileage, even when they are on low miles or miles based policies. Instead they estimate, and many of these people underestimate their mileage substantially. It is hard to say who is honest and who is not, but it is clear there is a problem. For some, it is a strategy to save money to keep their premiums low. Another thing that frequently happens is that drivers do not update their agents when they take new jobs much further from home and put way more miles on their cars.

Unrated Drivers in the Household

Another common lie told by car insurance consumers is one of omission. Normally it involves not letting the insurer know a high risk teen has been added to the household of drivers. Sometimes it is another family member who has numerous moving violations or accidents. The strategy behind this tactic is very obvious. Teens and other high risk drivers clearly have an effect on the price of auto insurance for the households involved. To save money, they hedge their bets that their insurer won't find out about the new driver. By simply omitting that important fact of an additional driver, these people are lying, although in not so many words.

Lying about Garage Location

The location where a car is parked at night is a major factor in the determination of auto insurance premiums. Places like large urban areas usually cost drivers more because there is much higher traffic to deal with and higher auto theft rates. So, drivers who lie about their parking location come up with a friend's address in the suburbs or some other address as the place they say their car is parked at night. False locations given for the garage where car is parked can lead to huge losses for the auto insurance companies being lied to.

Claiming Discounts that Don't Apply

Another common lie of omission that drivers frequently (don't) tell to their insurers is updates on discounts that do not apply to them any longer. For example, membership in certain groups might bring a discount. And maybe a driver had been a member of just one such group but is no longer a member. The lie is not updating his records with the insurer even though he is getting a discount he knows he shouldn't be getting. Taking advantage of discounts that drivers really do not qualify for costs the industry all kinds of money. And with no way to effectively check on these things, it is a tough practice for the industry and individual insurance companies to try to fight.

Lying About Use of Car

People do this to insurers all the time. A roofer might carry a personal insurance policy and never mention that he uses his pickup truck for work every day. A woman running a childcare business out of her home may transport children all over town in her van without the proper insurance policy covering her for doing so.

Insurance companies tend to find out about these lies when claims are made and people get into accidents. It is not worth it to lie to an insurer to save a few bucks, because if they find out they can cancel you, which will lead to much higher rates for a long time.


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