Five lies you tell your car insurance company

Craig Guillot

Lying can land you in the doghouse with your car insurance company. Your punishment could include denial of a claim, a retroactive premium increase, cancellation of your policy or even a criminal charge.

If you're fearless, go ahead and tell a tall tale to your car insurer. Just keep in mind that there’s a good chance it'll find out, especially when you wind up filing a claim for that fender-bender in rush-hour traffic. Aside from tripping you up after you've filed a claim, a car insurance company routinely performs audits to root out fraud or errors.

Here are the top five lies you're likely to tell your car insurance company -- and why the insurer probably will learn the truth sooner or later.

1. I don't drive all that much.

According to the Federal Highway Administration, the average American drives 13,476 miles a year. Because the more time you spend on the road increases the likelihood that you'll be in an accident, many insurers charge higher premiums if you rack up a lot of miles. It’s why all insurance companies ask how much you drive when pricing your policy.

Underreporting the number of miles driven is a common lie. "They may say they don't commute far, but they're really traveling 100 miles per day," says Robert U'Ren, senior vice president at Quality Planning.

This lie is easy to spot. Insurers can usually look at a person's home address, the address of his place of employment and determine a work commute. If that's higher than what is stated on your insurance paperwork, it can throw up a red flag.

2. I don't have a teen driver at home.

Every driver who lives in your home is supposed to be on your own car insurance policy. This applies to children, spouses, domestic partners and sometimes roommates.

Loretta Worters, a spokeswoman for the Insurance Information Institute, says some households often will neglect to tell an insurer that a teenage driver is one of the household members. Because teen drivers tend to get in more accidents than other drivers, car insurers demand higher premiums to cover them.

"If you insure your young person's vehicle in the name of an older driver, it could cause a big problem," Worters says.

Your insurer eventually may discover this lie if it cross-references state motor vehicle records as part of its quality assurance efforts or if the teen driver ends up in a crash.

3. I haven't had any major changes in my life.

Americans are constantly changing residences, switching jobs, getting divorced and buying new vehicles. Each time there's a big change, you're supposed to notify your car insurer.

Analysis by Quality Planning shows policyholders are more than five times likely to report changes midway through their policy terms that lower car insurance premiums than changes that may cause a spike in premiums.

Dean Basse, general manager of Dan Burghardt Insurance Agency in New Orleans, says most policies require that you notify insurers of any major changes within 30 days. And there could be repercussions if you didn't do so and they uncover the truth.

“It all depends on the carrier, but they could try to collect the difference in premiums if you’ve moved or had a major change in your policy,” Basse says.

4. I always park my car in a safe place.

Where a vehicle is parked or where a driver lives can play a big role in car insurance premiums. Neighborhood crime rates, local weather patterns, the make of your vehicle and the spot where you typically park your car -- a street, a driveway or a garage -- all can factor into the risk of damage or theft. Parking a car on the street in a bad part of town can trigger much higher premiums than parked it in a garage in a quiet suburb.

Some drivers may use a post office box, a friend's house or a summer house as a primary home address if it cuts car insurance premiums, according to Worters.

"People can use all kinds of different addresses to give an inaccurate depiction of what their risks are. They may even use an address in another state," Worters says.

5. I don't use my car for work.

Usually in reference to work-related activities, many drivers misstate how they use their vehicles.

Some personal polices have fine print voiding your coverage if you use your vehicle for business purposes. Whether you need commercial car insurance depends on the nature of your business and how you use your vehicle.

Lying about this could become a problem if you file a car insurance claim. If you're a carpenter who said your truck was for personal use, but you then report the theft of $3,000 worth of tools, that'll certainly catch the eye of your insurance company.

U'Ren says your car's mileage can signal to your car insurance company that you're really using your personal vehicle for your work.

"A driver might say they're a stay-at-home mom, but they (the insurer) might figure out that she's a Realtor and driving a lot more for business," U'Ren says.

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