When Does a Little White Lie Become Insurance Fraud?


What are the consequences if you lie to your car insurance company?

Man looking down and ashamed
9 min read

In the U.S., drivers are legally required to carry auto insurance. (Even in New Hampshire, the only state where drivers can technically forgo auto insurance, they’ll have to prove they can pay damages). It’s a big expense, and you just might think you can save a buck by telling a lie to your insurance company or two. We get it, if you tell your insurer you keep your car in your parents’ (or in-laws’, or sister’s) small-quiet-crime-free town when really you keep it in the big-busy-crime-ridden city, the price difference can be 40, 50, even 60 percent. It’s just a fib, right? Not necessarily. Lying in the present to save money leads to future expenses and trouble that far outweighs any financial savings.

Below, the most common lies people tell auto insurance companies, and the consequences.

Why Might You Lie to Your Car Insurance Company?

Insurance companies ask drivers a lot of questions to determine how much financial risk they pose to the companies and thus price their individual quotes. Many of these questions are easy enough: what’s your address, birthdate, vehicle model year, or marital status. Others can be more complicated: what specific upgrade packages (like special paint or leather upholstery) does your car have, what tickets or accidents happened within a certain time frame (usually three to five years), the exact dates of traffic tickets, and total annual mileage.

Most people don’t have all of the info they’ll need to apply for an auto insurance policy at their fingertips, and if you’re looking for an insurance policy on a comparison tool like The Zebra, you might be tempted to make best guesses rather than verify specifics. But if you’re looking to get accurate quotes, and expedite the application process, it’s better to ensure every piece of info you give an auto insurance company is accurate. They will verify what you tell them, and if discrepancies are found, they may charge you a higher rateor even cancel your policy altogether.

Man pondering something at computer
Better think twice about lying to your insurance company.

It’s possible to make it through the application process with a potential insurer by fudging or fibbing, but you’ll only slow yourself down. A few examples:

  • When applying for insurance coverage, you tell the agent you have a Lexus RX 350 when really you have an RX 450h Sport–a price difference of over $15,000. Maybe you didn’t realize because you didn’t originally buy the car, or you were confused by the question, but your insurance company will nearly always require you provide your VIN before you’re able to purchase a policy. A flub like this will mean any rates you were quoted will most likely change, and you’ll have to start at the beginning with comparison quote shopping from different insurers.
  • You think you have a high credit score, but perhaps you’ve dropped into a different credit tier, or the reverse: you have better credit than you think. Drivers with poor credit may pay double what people with excellent credit pay for car insurance, so your rates may change dramatically if you incorrectly assess your credit health.
  • When you got that last speeding ticket or made your last insurance claim: before selling you a policy, almost every auto insurer will run your license number for ticket history and will look into past claims.

The bottom line: you’re unlikely to have serious consequences with these types of lies because they are almost always immediately discovered and you may be faced with paying a higher rate. But if you do end up purchasing a policy based on a lie like one of the above, you could be in for financial and legal consequences. More on that below.

Fibbing about your insurance needs will only slow down the process.

What Lies Might Backfire After Drivers Have Purchased a Policy?

Other types of lies may seem easier to get away with, and the consequences are unlikely to be immediate. A few common ones:

  • Where the vehicle is parked — your zip code is a big factor in your rates, so lying about where you store your car (and say a safer neighborhood than yours, for example), is considered insurance fraud.
  • Who will be driving the vehicle: you might be tempted to leave a roommate, teenager, or spouse with a poor driving record off the policy, for instance, to keep your rates up.
  • Marital status: men, especially, get big discounts–up to 10 percent–just for being married, so you might tell a potential insurer your live-in is really your legally-wed.

During the application process, an insurance company isn’t going to send a spy to verify where you actually keep and use your car, they aren’t going to hide in the bushes to see who takes your car out for a spin, and you don’t submit a marriage license with a policy purchase. But if you get into a crash, or you need to make a claim for vandalism or weather-related damage, or even if you use your insurer’s roadside assistance, lies like these can be easily uncovered. If you’re making a costly claim, you can bet your insurer will investigate.

Most auto insurance companies have Special Investigative Units who are aided by law enforcement. Investigators will look closely at your financials, legal documents, social media accounts, and may even interview people close to you, making lies like the above fairly easy to uncover.

Do you lie about where you park your car to save on insurance?
Do you lie about where you park your car to save on insurance?

The Consequences of Lying to Your Car Insurance Company

Insurance fraud costs insurance companies billions of dollars a year, so you can bet they come down hard on violators. Our insurance expert Neil Richardson says there are three main lines of defense auto insurers have against dishonest customers: policy cancellation, claim denial, or premium increases. Any of these can be enacted at any time (with valid reason, of course), and it’s usually when you’re most vulnerable (like after a crash or during the claims process).

A final note: fraud of all types (including auto insurance fraud) has legal consequences in the U.S. If you’re caught in a fraudulent lie, you’ll not only be on the hook for any costs your insurer would have otherwise covered, you may be facing hefty fines, community service, probation, or even jail time.

Lie to your insurance company & they may cancel your policy, deny your claim, or increase your rates.

Walking a Fine Line Can Save You Money

If you’re not truthful with your insurer (either intentionally or because your head sometimes drifts to the clouds), it’ll cost you. However, while you must answer the questions insurers ask you truthfully and provide all pertinent information, there is such thing as too much of a good thing.

For instance: when you’re applying for a new policy with a new insurer, they will ask you if you’ve had any tickets in the last three years. You must tell them if you have, but you don’t need to tell them about the speeding ticket you got six years ago, or the crash you had as a teenager. Similarly, once you’ve got your policy and you get a speeding ticket, you don’t necessarily need to call up your insurer and tell them. There’s a good chance they’ll find out on their own and bump up your rate, but unless your policy states otherwise (and always check the fine print), you’re under no legal obligation to volunteer the information.

The moral of the story: double-check all of your vehicle, driving, and demographic details before seeking auto insurance quotes, and definitely before signing onto a new policy–and don’t lie! It just isn’t worth the financial risks insurance is intended to protect you from.

Finally: if you don’t understand a question in the insurance application, just ask. And as always, we’re here to help.