Remember when your mom taught you to always tell the truth? Well she probably wasn’t thinking about insurance at the time, but she did know that when you lie, people eventually stop trusting you. And when they stop trusting you, they just don’t want to deal with you anymore, because they can’t be sure about anything that you say or do.
Your mom knew that building and maintaining trust would be a crucial part of every relationship you would have as you grew up, and now that you’re grown, you know it too. And one of those relationships is with your insurance company, possibly through a broker.
When you call for an insurance quote, your broker asks you a bunch of questions to help the insurance company determine how likely you are to make claims, and based on that, whether they want to insure you, and at what price.
If you know that you are undertaking activities that put you at higher risk of claims, it can be tempting to lie about it, to keep your rates down. Not a great idea. There are lots of ways that the truth can come out, and the cost of getting caught can be devastating.
Not everything that’s inaccurate is necessarily a lie. If you estimate that you drive about 10,000 km a year and it turns to be a little more or a little less, that probably won’t come back to bite you. On the other hand, if you lie about something that dramatically affects your level of risk as a driver, like any of the examples below, you’ll probably get caught sometime in the future when you get in a fender bender. Here’s what could happen:
That said, here are a few specific things that you don’t want to lie about:
Your postal code can make a huge difference in how much you pay for insurance. That’s because it makes a big difference in the number and cost of claims. In fact, you’re likely to pay twice as much for auto insurance in some parts of the GTA compared to some of the less populated parts of the province, like Cornwall for instance. If you think about it, it makes a lot of sense, given that you’re sharing the road with 20 times as many vehicles in the GTA.
If you provide a false address when you apply for auto insurance, you may think you’re getting away with it for a while, but the sad truth is that you don’t actually have insurance. If you ever get in an accident and it comes out that you lied on your application, your claim will be denied and you will only be able to get insurance from the province’s insurer of last resort. You will pay through the nose for at least six years.
Claims data shows that using your car to make food deliveries, whether it be directly for a restaurant or through an app like Uber Eats or Skip the Dishes, increases the likelihood that you’ll be in an accident. For this reason, most insurance companies won’t insure drivers who are using their vehicles for this purpose. The insurers that do offer this coverage will charge more than they would if the same driver were using the car for personal use.
If you apply for insurance and say that you only use the vehicle for personal use, and then you get in an accident and there’s pizza sauce all over the windshield, your insurance company will probably investigate further. If it turns out you lied on your application, same story as above. Not only will your claim be denied. You’ll be in insurance hell for the next six years.
Insurance companies base their pricing on past claims, and it turns out that driving for ride-sharing services like Uber and Lyft is not nearly as risky as using your car to make deliveries. Still, there is increased risk involved, and so there are fewer companies willing to insure you, and you could pay a higher rate for that reason.
If you want to make a few bucks by offering rides, call a broker to ask for quotes first. You may be pleasantly surprised. Regardless, what you definitely don’t want to do is lie about it. If you do, your future will involve high premiums or riding the bus.
Important note: If you got insurance today, then you started driving for Uber tomorrow, you might think that you didn’t technically lie on your application. Sorry to disappoint you. You are required by law to inform your insurance company about any material changes that could affect your coverage. That includes a change of address or any of the other special circumstances discussed in this article. Failing to notify your insurance company is exactly the same as lying under the law.
This is becoming a popular way to make a few extra bucks during hours when your car might just be sitting in your driveway. Turo advertises that they provide liability insurance while your car is being driven by someone else through the app. This doesn’t mean that you can cancel you own insurance, and it also doesn’t mean that your own insurance company will want to cover you. Interestingly, there are a few insurers that offer coverage for Turo users, and the prices are not outrageous.
If you decide to try to get a slightly better deal by telling your broker that you only use the car for yourself, that could definitely come back to bite you. In fact, we had a client who lied about using Turo, and one of the people he lent his car to got in an accident. The claim was denied and the customer was cancelled by the insurance company for misrepresentation. All this to save a couple hundred dollars in premiums?
This is another growing trend. As recently as 2018, there was an average of 128,000 AirBnB listings on any given day across Canada. Some people rent out entire homes, while others rent out rooms. All for short-term stays. Once again, the data shows that short-term rentals like these lead to a much higher incidence of claims, and so not all insurance companies want to provide insurance for these properties. Because fewer insurers offer this coverage, you may not get as good a deal as you would if you were insuring your home or condo for personal use.
This may sound like a broken record by now, but if you get caught lying about renting out your home through AirBnB, any claim you make will be denied. The difference between home insurance and auto insurance is that there’s no insurer of last resort for home insurance, so if you get cancelled for misrepresentation, you may never be able to get home insurance again. If you do, it will be much more expensive, and coverage may be limited.
Going back to what your mother taught you, honesty is always the best policy, and when it comes to insurance, it’s never a good idea to lie. In most cases, you’ll be able to find insurance for just about any circumstance you can imagine. The cost may be more than you want to pay, but that cost is justified by years of claims data. Rest assured, the cost of getting caught is infinitely higher.
Want to add to this story? Let us know in comments below! Mitchell & Whale is a fast-growing insurance brokerage in Ontario, striving to make insurance _not suck_ one customer at a time. Give us a call today to discuss any of your insurance needs at 1.800.731.2228.