When your grandparents bought insurance, they drove the car to an agent's office. They filled out an application and the agent took a look at the car to see what kind of shape it was in. Lying was rare because people knew their agents personally. Today, many simply go online and get a car insurance quote. They buy insurance and never see an agent in person. So the temptation is there to leave out important information or not to disclose tickets or accidents in the hope that the rates will be better. However, there are some serious consequences for application for insurance lies.
The first consequence is that your application can be rejected by the insurer. They won't just take your word for it when it comes to your driving record or your credit score. When they get this information and it doesn't match your application they can simply refuse to insure you. Even if the policy is accepted the rates might be higher than they would have been because now you are seen as a higher risk to the insurer.
Even if the insurance lies are not caught at the time the policy is initiated, if the company finds out that anything on the application is false the policy could be terminated immediately and you can be left without any insurance.
The problem may come when you have an accident or any kind of claim. At the time of the claim, the insurance company will investigate the claim. They may also take a look at your application, especially for a first claim. They simply have to find one lie on the application and your claim will be denied and they can cancel your policy. If you have had an accident or your car was stolen you could end being out thousands of dollars simply due to a lie or omission.
The most severe consequence could come if the insurance company pays out claims under your policy. Then in the future they find out that you did not tell the truth when you applied for the coverage. Not only will the policy be canceled but you can be sued to recover the benefits that paid to you. They may even press criminal charges if they feel the dollar amounts or the lies told were substantial.
Insurance that you buy based on a car insurance quote with a false application really doesn't give you any protection at all. Virtually anyone who needs insurance can get it. The rate may be higher if you have a problem driving record or bad credit, but at least you will have coverage that actually protects you.