The Effects and Consequences of Car Insurance Material Misrepresentation
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UPDATED: Sep 17, 2021
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Car insurance material misrepresentation is a situation in which information is falsely reported on an insurance application. When a company decides whether to insure you and what your rate will be, it asks you many questions. Answering them requires you to be completely truthful.
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Misrepresentation happens whether you purposely lie or accidently leave something off your application. As a result, the insurance company can take action against you in a variety of ways. The punishment may be minor or it may affect you in a more serious way.
Occurrence of Material Misrepresentation
Material misrepresentation in regards to car insurance happens more frequently than you may believe. Some individuals choose to purposely lie about things while and other individuals may omit certain information by mistake, especially if it was a small thing. In either case, the person can be accused of material misrepresentation and this is one reason that it’s so tiresome to file a claim.
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Types of Car Insurance Material Misrepresentation
When it comes to car insurance, an assortment of things can constitute material misrepresentation. Those who do it on purpose usually do so in order to get lower rates on their policies.
One way information is misrepresented is by not telling the truth about particular features of your car.
If you inform the company that you have features that you really don’t have, you are committing misrepresentation. This includes safety items such as multiple airbags, traction control, and anti-lock brakes, as well as items that help ward against theft.
Where your car is kept is another way people try to lie. Your rate will usually be cheaper if your vehicle is stored in a safe place, such as a closed garage. If you say that is where your car is usually stored but you really leave it on the street, you may get into trouble.
Although they are harder to hide or lie about, misrepresentation can happen in regards to your past criminal record, marital status, number of driving or traffic violations, DUI arrests, or marital status.
Consequences of Material Misrepresentation
The consequences of performing material misrepresentation will vary according to the severity of the act. In many cases, the rate of your policy will increase, and sometimes it will even be cancelled.
A material misrepresentation that is minor, such as a simple mistake on your application that you correct, will usually not negatively affect you. As long as the misrepresentation didn’t cause your insurance company to lose money or spend more than it should, you should be able to keep your coverage.
Each company deals with misrepresentation differently. In certain cases, if you were involved in a car accident that caused your insurance company or the other party’s insurance to pay out money, you would be required to pay the money back. If it was found that you lied, you may be taken to court to recoup the claim damages.
Many times in material misrepresentation, your insurance policy will be cancelled. For a company to cancel it because of misrepresentation, it needs to be able to show four things. The misrepresentation needs to be proved, it needs to be proved fraudulent, prove that this was the reason the driver obtained coverage, and validate the confidence of the misrepresentation.
For major cases of misrepresentation, your company may cancel the insurance policy retroactive to the date it first began. Because this means you would have been illegally driving without insurance for all that time, it may result in suspension of your license.
Effect of Material Misrepresentation on Future Insurance Policies
If you performed material misrepresentation that affected your policy, your company may decide to let you keep your policy or it may cancel it. If it decided to let you keep it, you will more than likely have to pay higher premiums on your current and future policies with the company.
With a cancellation, you will need to find another insurance company. With a misrepresentation on your record, this could prove to be difficult. Without insurance you cannot drive, according to the Insurance Information Institute. Once you do find coverage, you can be assured that your rates will be quite high.
The smartest choice you can make in order to keep your car insurance coverage and to keep your rates low, is to always tell the truth when you fill out your insurance application.
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