What are the consequences of lying on your auto insurance application?

We all fib from time to time, but when it comes to auto insurance, lying is a much more serious transgression.

Lying on your auto insurance application is known as misrepresentation or non-disclosure, and it can land you in a lot of trouble with your insurance provider. 

Some examples of misrepresentation or non-disclosure include: 

• Not informing your insurance provider that you use your vehicle for food deliveries or ride-sharing services
• Not listing someone who regularly drives your vehicles as a secondary or occasional driver on your insurance application
• Lying about past at-fault accidents and traffic tickets (your insurance provider will be able to find this information, anyway)
• Lying about your mileage (e.g. how far you drive to and from work, in a given year)
• Lying about your address (postal code is a big factor in determining rates)

And there are serious consequences for lying on your auto insurance application. We explain below:

You could face fraud charges

Insurance fraud is no joke. In Canada, if you’re caught lying or deceiving your auto insurance provider, you could face criminal charges, and even wind up serving anywhere from two to 14 years in prison.

There’s also the criminal record that you’ll now have, which will hold you back when applying for credit, jobs, housing, and so on.

Your claims will be denied

A less criminally serious consequence — but a financially burdensome one — of lying to your auto insurance company is that your claims could be denied.

If your auto insurance provider finds discrepancies between what you indicated on your application and what they find out to be the truth, you risk having your claims denied, which means you would have to foot the bill for any damage. 

You’ll pay more for auto insurance

Another risk you face by fudging information during the insurance application process is being charged higher premiums. 

If, for instance, you lied about your address in order to secure a lower rate, not only will you pay more for premiums if you live in a postal code with a high number of claims; you’ll pay more as a penalty for lying about your address in the first place. 

Your auto insurer could cancel your policy

A more serious measure that your auto insurance provider could take if they find out you deliberately misrepresented or failed to disclose information is cancel your policy altogether. 

It’s one thing to cancel your own policy, but to have an auto insurance provider cancel on you will not look good on your record. Non-disclosure cancellations stay with you for three years, and it could result in higher premiums with the next insurance provider that decides to take you on (if they do).

Other insurance providers won’t want you 

Once there’s a black mark on your record for non-disclosure, misrepresentation and/or cancellation, other auto insurance providers won’t be too jazzed to do business with you.

In fact, they might outright deny you coverage because you’re now deemed “high risk.” That could mean you need to pay higher rates to be insured with a high-risk provider. Or, if you can’t get auto insurance at all, your only other option would be facility insurance, depending on the province you live in. Facility insurance is seen as the “insurer of last resort,” and is much more expensive than traditional auto insurance.

What if it was an innocent mistake?

It’s entirely possible that you mistakenly filled out incorrect information on your auto insurance application. You may not have had all the information you needed at the ready when you were, which could have led you to make guesses about certain information. 

If that’s the case, you can explain this to your auto insurance company and it will be at their discretion whether or not to penalize you or consider it an honest mistake. If it was an honest mistake, chances are they won’t void your policy, but in the end, it’s up to them. 

The best thing you can do, though, is verify all of the information you’re providing at the time of application so that you know it’s accurate and they can’t come back to you saying that it’s not.