Lying on an auto insurance application.. the benefits vs consequences

Posted by Uni Aguilar on Tue, Oct 15, 2013 @ 13:10 PM

I am currently taking a class on becoming a tax preparer, and in that class I drew some comparisons to the insurance world. Today I will specifically be talking about some of the common "details" that customers fib or flat out lie about on the application. Much like the insurance world, there are certain misinformed individuals that believe that omitting or flat out lying on their tax return is beneficial to them. Although the "benefit" is immediate, the consequence can be far more costly in the end if you are discovered. The insurance purchasing process is a data entry process and interview at the same time. You inquire on the customer's specific information, such as address, telephone number, name, birthdate, marital status, and so on and so forth. The application of an insurance policy includes language that expressly states that lying on the application is grounds for a denial of coverage, or even in some cases, prosecution in the court of law. Here are a few examples of what people lie about when purchasing auto insurance:

  • Address/zip code: For those that know, for auto insurance, where you live has an effect on how much you pay for your premium. Ask anyone that has moved from Los Angeles County to Riverside County and they will tell you that the impact on the cost of insurance is significant (by the way, Riverside is cheaper than LA). Some people know that their rate is cheaper in certain zip codes, and they lie about where they live. This results in a decrease in premium, however, if you are caught doing this after a claim, you will most likely be denied coverage or in some cases prosecuted legally. Companies are now suffering through what is called a "hard market" - a cycle during which time coverage may be more costly, terms may be more restrictive, and policy conditions and requirements more stringent - so they are being more careful with business they write. Many companies are employeeing individuals that are tracking patterns in where there is a "discrepancy" in the zip code vs the area in which the policy was purchased.
  • Not diclosing household members of driving age on the application: Essentially, insurance premiums are relative to the risk. So more risk, more premium. Many companies want to know the names, birthdates and sometimes the license number of ALL members of the household who are of driving age. The "trick" that is pulled with this one is an individual will buy a policy under their name, having a good driving record, and getting a really good rate, BUT not disclosing that there are actually other drivers driving the vehicle other than himself. Companies base their rates on what is on the application, by not disclosing all members of the household, the company is not giving you that rate that you should be paying. The best commercial that I have ever seen that illustrates how rates work is the Progressive commercial "Rate Suckers". This is why rates go up.
  • Annual mileage: This is another rating factor in California, and I will admit that there is a lot of gray area with this one. A good example to compare: someone that is retired and drives to and from the store, the pharmacy or the park is going to be a lower risk than someone that has a commute of 100 miles a day to and from work. Unfortantely, this is something that many companies have a different policy on, so it is fairly inconsistent as far as the rules on how they are reported. However, if a company is expressly asking you to detail you annual mileage, do not underreport it, because again, you may be denied coverage.
  • Marital status: The discount rate on this one varies from company to company. A married person represents a lower risk to insurance carriers, and that is why a discount exists. Some people put themselves as married on an application when they really aren't. If you are separated but not divorced, most companies will want you to list yourself as single. There are some individuals that actually go beyond that and flat out lie and invent names of people who do not exist and give them the same last name as theirs. There are a lot of companies that you can get away with this with, however, many companies that are privy to this "trick" are asking for proof of marriage, proof of residence or in some cases plain and simply proof of existence (anything with their name on it with the same address as yours). I have seen cases where a brother & sister put themselves as married to each other (because they have the same last name) just so that they can get that married discount. The insurance carrier discovered this during the claim, and needless to say the claim was denied and they were prosecuted for fraud.
I have listed a few, but not all, of the common things that I have seen that people can lie on. Again, the consequences far outweigh the benefit. If it can be proven that you lied, your claim will be denied. Most accidents cost more than the premiums you pay, so saving a few dollars for a discount you don't qualify. Another thing that I strongly urge you to pay attention to and red flag is to NEVER allow an insurance sales person to ever "help" you. Lying on an application will not "help" you. The only person that will suffer consequences will be you, not the sales person, because most likely that sales person will not be there when you come back and need them to explain to you why you are being denied coverage. Someone that suggests to you that they can lower your rate by "helping" you lie on an application is not someone you want to do business with. Help insurance rates stay low, represent yourself accurately on all applications you submit. DON'T BE A RATE SUCKER!
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Topics: coverage, underinsured, rates, insurance, riverside, auto insurance, myth, debunked, liability, vehicle

Why did my auto insurance rates go up?

Posted by Uni Aguilar on Thu, Mar 24, 2011 @ 23:03 PM

Have you ever wondered why your auto insurance rates change? There could be various reasons that cause a change in your auto insurance rates: some of them are easier to understand and accept, and some are harder to understand and unacceptable reasons as a consumer. Here are a few of the reasons prices go up, or sometimes, down:

  • If you have incurred moving violations and additional points in your record this will cause your rate to go up. Remember, that insurance rates is calculated based on risk, and if you are a higher risk, you will pay a higher rate. The opposite also is true, when you have less points, you will get a lower rate, and in fact, California has a massive discount, the California Good Driver Discount, that drivers with 1 point or less qualify for.
  • Some companies offer what is called a "loyalty discount" - not all companies offer this discount, but a handful do. This discount is offered to customers who renew their policies with the same carrier. If you leave the company, you lose the discount, this is why it is sometimes NOT a good idea to be bouncing around from company to company.
  • If a company experiences many losses (accidents/claims) it has to adjust its rates to stay profitable, and as a result, many customers see increases in their rates. From an individual customers perspective, this is unfair, because you have not done anything to cause these increases, and it is understandable why many customers do not accept this reason. However, from an insurance company perspective, it is very necessary to adjust rates accordingly to profitability, otherwise, a company will become insolvent. From a consumer point of view, the best way to counter this particular event is to simply shop around and place your insurance with another carrier.

However, despite the aforementioned, most policies keep the same rate as the previos term. Many customers wonder why a company doesn't lower the price & reward customers. The best way I can answer this question is by giving you this example: if you buy a pencil, and you need to buy a new one, the price stays relatively the same. You may or may not see a price different, but generally speaking, it stays the same.

Topics: rates, change, auto insurance, liability

"Full Coverage" Auto Insurance Explained

Posted by Uni Aguilar on Tue, Nov 09, 2010 @ 17:11 PM

For my first blog on insurance I will write about THE most commonly used and most misleading term used in insurance: "full coverage" auto insurance. I have been wanting to write about this for so long because it is so widely used and misunderstood, it is important for me to educate my clients and whoever cares to learn about this widely used term. What is wrong with the term "full coverage" auto insurance? Why is it important that this term be debunked? Here's a few reasons:

  • "Full coverage" does not exist. You will not find "full coverage" listed on your declarations page, application or in any documentation you receive from your insurance carrier. As insurance agents, in our pre-licensing stages, there is no text that defines "full coverage" auto insurance.
  • "Full coverage" is a term used by car salesman who do not have a license to sell insurance, or a person selling you an insurance policy who is NOT licensed to sell insurance, or worse, by a person who is licensed but does not advise & educate you on the term. Explaining to a customer that "full coverage" does not exist adds 5 extra minutes to the sales cycle - there are some people who do not want to take that extra step.
  • "Full coverage" implies that everything is covered. "Full coverage" - those 2 words are very powerful as far as gaining a customer's trust and confidence, however, no policy in the world, even the most exotic and expensive, will cover everything. Be very wary of anyone that tells you "everything is covered".
  • "Full coverage" oversimplifies a not-so-complicated but not-so-simple to understand policy. By you not understanding that this term is in fact not a coverage at all, you put yourself at risk for being underinsured or not being covered at all! Learning that something is not covered when it was what you actually needed makes you feel sick! I can personally attest to this feeling. It is a feeling you want to avoid.

Your auto insurance policy has many options. Every person has different needs, so one policy can look very different than another, not just in terms of price, but in coverage as well. Remember, auto insurance is not a commodity, like a phone that Wal-Mart buys 100,000 units of and sales it to you at a discount, you cannot buy auto insurance in bulk, as many commercials who advertise "$17 a month insurance" would have you think. When shopping for auto insurance, and, when deciding to actually buy, don't skimp on coverage & definitely STAY AWAY FROM anyone that let's you walk away without explaining to you what "full coverage" really is.. or is not.

Topics: coverage, underinsured, Full coverage, auto insurance, myth, explained, defined, debunked, liability