Your car insurance rates are determined partly by how risky you are to insure. Therefore, it makes sense to present yourself as low-risk as possible when applying for car insurance to secure the lowest rates. However, some people take that as a reason to lie on their applications, misrepresenting their risk profile to get lower rates.
Unfortunately, lying on your car insurance application can put your coverage at risk.
For this article, we reviewed section 233(1) of Ontario’s Insurance Act, which explains how a knowing misrepresentation or failure to disclose a material fact can affect a claim.
Lying on Car Insurance Applications at a Glance
Lying on your application can lead to claim denials, policy cancellation and legal consequences.
A previous cancellation may make it more difficult or expensive to find insurance.
If you notice a mistake on your application, tell your insurer or broker as soon as possible.
What Counts as Misrepresentation?
Under Ontario’s Insurance Act, a claim may be invalid if an applicant knowingly makes a false representation or fails to disclose a material fact required to be stated in the application.
A material fact is information important enough to affect the insurer’s decision to provide coverage or calculate the premium.
How Misrepresentation Can Cost You More in the Long Run
You may think that presenting yourself as a lower-risk policyholder will reduce your premiums and save you money. However, misrepresentation may cost you much more later.
Claim Denials
If an insurer finds that you knowingly misrepresented or concealed material information on your application, your claim may be denied. That means you may need to pay for the damage yourself.
Policy Cancellation
In serious cases of misrepresentation or non-disclosure, the insurance company may cancel your policy altogether. Cancelling your own policy is common, but having the insurer cancel it may not bode well for your future insurability.
If an insurance application asks whether an insurer has previously cancelled one of your policies, you must answer accurately.
Higher Premiums or Difficulty Finding Coverage
After a policy is cancelled for misrepresentation, you may face higher premiums or have difficulty finding another insurer.
You may be considered a high-risk applicant, and some insurers may turn down the application.
Legal Exposure
Deliberate insurance fraud can lead to criminal charges. Under section 380 of the Criminal Code, fraud exceeding $5,000 is an indictable offence carrying up to 14 years in prison. Fraud of $5,000 or less may be prosecuted as an indictable or summary-conviction offence.
Potential Loss of Future Insurability
Once you’re caught misrepresenting information on an insurance application, you may have difficulty getting insurance in the future. Some insurers may offer much higher rates or decline your application.
Most Common Misrepresentations on Insurance Applications
There are many things an applicant can misrepresent on an application. Some common examples include:
- The number of kilometres driven
- Who regularly drives the vehicle
- Past accidents and driving infractions
- The address where the vehicle is normally kept
- How the vehicle is used
- Previous policy cancellations
Insurers may verify the information provided, so it’s best to answer each question accurately.
The following MyChoice figures show how average premiums can differ across driver profiles. They do not represent guaranteed savings or the effect of changing only one detail.
| Information people may misrepresent | Difference in average annual premium | Spread |
|---|---|---|
| Principal driver’s age | Age 18–20: $5,576 vs age 55–64: $2,093 | $3,483 |
| Garaging address | Brampton: $4,210 vs. Cornwall: $1,922 | $2,288 |
| Driving record | One at-fault accident: $2,969 vs. clean record: $2,345 | $624 |
How to Avoid Unintentional Misrepresentation
Sometimes mistakes happen, and you can accidentally provide incorrect information on your application. This may happen if you forget your first licence date, leave out traffic tickets or accidents, or forget that a previous policy was cancelled for non-payment.
Generally, these mistakes can be avoided by double-checking your information before submitting the application.
You can also:
- Review your driving record and claims history.
- Check the original issue date of your licence.
- Answer each question exactly as it appears on the application.
- Ask your insurer or broker if you’re unsure what must be disclosed.
- Correct an error as soon as you discover it.
Bottom Line
Common misrepresentations include past accidents, driving infractions, kilometres driven and details about who drives the car.
Double-check your information before submitting an application.
Tell your insurer if important information changes after the policy begins.