Insurance premiums are based on risk; the higher risk you are, the more likely you are to make a claim. Claims cost insurance companies money and they need to offset this, hence high risk policies often costing more than those deemed low risk. To reduce premiums, people sometimes withhold the truth from their insurers, reducing their perceived risk and premiums. Read on for the most common oversights and lies, and reasons as to why trying to defraud your way into a cheaper policy is a very bad idea!
When taking out home insurance, it’s important to value your home at its correct value. A lower value property will usually result in lower premiums, but will leave you out of pocket should you need to claim. If the insured amount does not cover the cost of a rebuild, you may find yourself unable to replace your home should anything happen. Similarly with contents insurance — if you lose everything in a fire and are unable to replace it, you will wish you had correctly valued your belongings when taking out your policy.
With regards to car insurance, adding someone to your own insurance instead of putting the insurance in their name (a common error that people make when insuring, for example, a newly qualified 18-year-old’s first car) may void any claim you make. This practice is known as ‘fronting’ and can result in prosecution.
Omitting medical details when taking out medical or life insurance could also carry consequences, both for you and your family. If you are taken ill with an undeclared pre-existing condition, your insurance company is unlikely to pay out. The premium may cost more throughout the policy, but the peace of mind you get knowing that it should pay out in the event of a claim is priceless.
Deliberately lying to get an insurance policy can lead to life-changing gaps in payouts in the event of a claim. Most errors or omissions are oversights rather than attempts at fraud, but could still result in you being unable to claim when you need to do so. Do check your policy wording thoroughly to ensure you are fully covered.
