Honesty is the Best Policy When Applying for Insurance

07 Nov 2023
Honesty is the Best Policy When Applying for Insurance

As children, we often hear the saying that “honesty is the best policy,” but as we navigate the complexities of adulthood, these valuable lessons can sometimes fade into the background. Some may argue that occasionally telling a white lie can be justified. However, when it comes to insurance matters, this approach can have consequences. The clear truth is that honesty is indeed the optimal strategy.

Falsifying information on an insurance application goes beyond the realm of a simple white lie, even if it initially appears minor. This act is officially termed “misrepresentation” or “non-disclosure” and has the potential to nullify your insurance contract. In certain instances, such deception might even lead to charges of fraud. Additionally, there are other ramifications to consider, even if legal actions are not pursued.

Your insurance contract hinges on the data you provide, and the underwriting assessment conducted by the insurer. During the underwriting process, the insurer verifies the accuracy of your provided information and consults various sources. If the data you provide proves to be untruthful, the insurer may not be obligated to honor any claims.

Here are several potential repercussions of dishonesty on an insurance application:

  1. Increased Premiums: The underwriting process relies on truthful information to accurately assess the risk and price the policy accordingly. For instance, if you claim to have a pristine driving record, but the insurer discovers a recent speeding ticket during their underwriting search, you can expect your premium to be higher than initially quoted.
  2. Denied Application: Certain factors, such as a DUI conviction, may make you ineligible for coverage with specific insurers. If an insurer uncovers such a factor that you failed to disclose, they may reject your application or terminate your existing policy.
  3. Denied Claims: Should you file a claim while being dishonest in your insurance application, the insurer could potentially reject the claim.
  4. Policy Cancellation: Lying about a factor that would have rendered you uninsurable in the eyes of the insurance provider can lead to policy cancellation. Such cancellations stemming from non-disclosure can make the search for a replacement policy a costly endeavor.
  5. Fraud Charges: In unfortunate circumstances, instances of misrepresentation or non-disclosure can escalate to fraud charges, entailing possible fines or even imprisonment.

Among these potential outcomes, increased premiums and denied applications are the most likely scenarios, although denied claims and fraud charges are possible in some situations.

In most aspects of life, including insurance, honesty remains the best policy. Engage in open and candid conversations with your insurance broker regarding your needs and history. Often, these professionals can assist you in discovering better ways to save on insurance premiums. 

Janis is a dedicated leader with over 30 years at The Standard. Janis's exceptional leadership and strategic thinking have been pivotal to The Standards success, making our workplace a thriving community. Her wealth of experience and strategic thinking have played a vital role in delivering an unparalleled service to our clients.

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