A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Written by Laura Berry
Former Insurance Agent Laura Berry

Leslie Kasperowicz holds a BA in Social Sciences from the University of Winnipeg. She spent several years as a Farmers Insurance CSR, gaining a solid understanding of insurance products, including home, life, auto, and commercial, and working directly with insurance customers to understand their needs. She has since used that knowledge in her more than ten years as a writer, mainly in the insuranc...

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Reviewed by Leslie Kasperowicz
Farmers Insurance CSR 4 Years Leslie Kasperowicz

UPDATED: Apr 29, 2022

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Important facts to know...

  • The practice of using someone else’s address for your car insurance is known as rate evasion
  • Rate evasion is a form of fraud and many states are taking harsher stances towards this practice
  • Insurance companies can refuse to pay claims if they believe that you’ve committed rate evasio

Insurance premiums can be expensive, but there are several ways to save money. If you’ve recently moved, then you know that your zip code plays a vital role in setting rates. It tells insurance companies what the crime and claims rates are in your area. So they have an idea of the risk they face by insuring you regardless of your driving record.

When you get into comparison shopping, you’ll find different prices because insurers use different algorithms. Some place more focus on your location while others account for other factors.

It may seem appealing to let a good friend use your address for insurance purposes, but this type of favor carries high risks that you should both be aware of. In fact, while it may seem harmless, it could be considered insurance fraud. Insurance companies could refuse you coverage, increase your premium on auto insurance policies after the fact, cancel your policy, or pursue criminal charges. They could take more than one approach.

There’s no risk to comparing car insurance quotes! Start right now by entering your zip code into our rate tool.

What types of fraud fall under rate evasion?

The auto insurance industry has identified several different types of fraud that cause problems for consumers and drive up rates. This is not limited to any single provider. It affects the industry as a whole including both big and small insurance providers.

Many people believe that actions are only fraudulent if they result in a claims payout, but providing false information with the intention of obtaining lower rates is also a form of fraud. Examples of rate evasion include:

  • Misrepresentation about the primary use of a vehicle
  • Use of a false Social Security number to hide concerns with a credit score
  • Using a different address other than where you live and the car is primarily garaged

These practices all contribute to the losses sustained by the insurance industry. These costs are passed back to consumers through higher premiums across the board. If your insurance agent knows, they would be complicit. This could lead to serious penalties even if you never file a claim.

Shopping around to find lower premiums with other companies remains your best alternative according to auto insurance experts.

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Could it be a fourth degree crime in New Jersey?

New Jersey has moved forward with legislation that makes rate evasion a fourth-degree crime.

This practice will now constitute a violation of the New Jersey Insurance Fraud Prevention Act, and all penalties and remedies listed in this act would now apply to people guilty of rate evasion.

The goal is to prevent people who live outside of New Jersey from using false or fake addresses for insurance purposes. However, the law would also be applied to anyone within the state who willingly gives the insurance company the wrong address.

What is the government’s role in stopping this practice?

It’s not just the insurance companies that stand to lose money when people engage in rate evasion. For many years, states have struggled with shrinking revenues when local drivers use addresses in neighboring states.

New York is known for having high the third highest level of premiums in the country.

However, when people in the Big Apple use addresses in Pennsylvania to lower their insurance, they also cost the state money. As far back as 2011, New York estimated that they were losing more than $1 million every year in various revenue streams, including:

  • Vehicle registrations
  • Parking ticket violations
  • Title certificates
  • License plate fees

There is also the hidden costs associated with law enforcement who struggle to get information from other states.

In the past, when police have tried to get information about out-of-state vehicles, they’ve found that calls aren’t returned, or the other jurisdictions charge fees to provide the information. Jurisdictions wind up wasting precious resources trying to track down the offenders.

What’s the cost to the general public?

Auto registration fraud and rate evasion isn’t just an issue for the insurance industry. It drives up the cost of auto insurance and results in safety issues. One issue is that insurers are unable to properly set risk levels and premiums when they have the wrong information.

For instance, people living in New York City have much higher insurance rates in part because of the number of accidents in that region.

The insurance company spreads out the cost over everyone who lives in this area, with people who have more troubling records paying slightly higher premiums. Of course, every insurance provider has to deal with different kinds of fraud. Sometimes, people use a friend or family member’s address. Other times, you could be a victim of identity theft. In short, someone would use your driving record and credit to apply for cheaper auto insurance. Filing a claim is one way they may get caught, but it can damage your record and cause more problems either way.

Over time, the pool of insurers to work with shrinks, yet the number of people on the roads and filing claims will remain the same or even increase. The result is quickly rising rates for everyone else who is trying to be upfront and honest with insurance companies. In cases of identity theft, both the state and other drivers could find themselves pursuing the wrong person.

On the other side of the coin, the rates can also be artificially raised for people living in the surrounding areas where rates should be lower.

When people who are living in New York use Massachusetts for their address, then any claims they file are erroneously charged against the community where they are registered. This can lead to people in that area paying higher premiums over time.

This is why states on both sides of the issue are seeking harsher penalties for those who lie about their address. When insurance companies have accurate information, they can determine appropriate risk levels and set premiums accordingly to better protect consumers.

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Can homeowners be penalized for letting others use their address?

Parents often fall into this category and don’t even realize it. If your child moved out of state and you allowed them to take the car without informing the insurance company, then you could be charged with rate evasion.

The insurance company can refuse to cover claims if they discover that the person is not living at home, and the policy could be canceled.

However, the penalties aren’t just for those drivers who use someone else’s address. As part of a recent investigation in New York, a major rate evasion ring was broken up.

In addition to charging the drivers, authorities also pressed charges against the person who orchestrated everything and provided drivers with the false addresses. Of course, this would require some knowledge on the part of the homeowner or other person letting others use their address.

While authorities may or may not take a harsh stance against someone who was just trying to assist a friend, the fact is that you would still face the possibility of criminal charges. However, people can easily save on car insurance by:

  • Asking for different discounts
  • Increasing their deductible
  • Dropping unnecessary coverages
  • Shopping around with other companies

If you suspect that someone is using your address without permission, then you’ll want to take steps to protect your identity and avoid any potential liability. Unfortunately, they probably aren’t just using your address for car insurance. They could also be signing up for credit cards in your name and taking advantage of you in other ways.

If you’ve received any mail from an insurance company, then reach out to them directly to inform them that the person does not live at your address.

If you’re worried about rising premiums and are feeling jealous of surrounding states with lower costs, then take heart that there is hope for you. When insurance companies compete for your business, it’s possible to get those costs down.

Look for family cars that carry lower premiums, and be sure to compare different rates to see which company will help you save the most. Compare right now and see how much you could save!