What Is Property Misrepresentation in Home Insurance? | | Reliable

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When purchasing homeowner’s insurance or when writing a claim, it is important to be completely honest with your insurer. False claims can have serious financial consequences for both insurers and policyholders.

As with insurance, misrepresenting facts can result in claim denials or coverage denials. Knowingly misrepresenting a policy to obtain benefits you are not entitled to is considered insurance fraud, and you may be charged with a felony.

Here’s what you need to know about insurance fraud:

Misrepresentation of goods in insurance

“Misrepresentation” is a fancy way of saying that you provided false insurance information (intentionally or unintentionally), or intentionally left out important information. If there is a willful and material misrepresentation, the insurance provider can cancel your insurance.

Insurers take this seriously because misrepresenting the truth about you or your home can affect your insurance premiums, or whether your insurance agent will approve you for the policy in the first place.

Two types of things are misrepresented in insurance:

  • Omitted lies: Hiding important information to mislead
  • Lies of the Commission: Deliberate misrepresentation

In other words, withholding information and knowingly lying both meet the standard of perjury and its consequences.

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Examples of false positives

While some omissions or misrepresentations may seem innocuous, risking a claim denial in order to save a few bucks on your bill is not worth it. After all, the purpose of insurance is to have support in times of need.

Here are some common examples of misrepresentation on a home insurance application or application form:

  • Cost of goods: Some landlords will lie about the true value of their property in order to receive less money.
  • Lease of leases: In some cases, the landlord may not live in the property, and instead rents the property to tenants. In some cases, the owner may rent out a room in the house as a short-term rental. In any case, hiding this from your insurance is lying.
  • Home remedies: Whether intentional or not, many homeowners fail to notify their home insurance company of renovations or additions that may increase the property value of their home. However, not including extras in the policy means that they will not be insured in case of damage.
  • Dogs: Home insurance providers paid out $675 million in claims stemming from dog bites and dog-related injuries in 2018, according to the Insurance Information Institute and State Farm. Homeowners insurance providers often do not cover certain breeds, including pit bulls, rottweilers, German shepherds, mixed-breed dogs, and American bulldogs. To lie about owning one of these dog breeds is a physical perversion.
  • Swimming pools: Swimming pools carry serious risks. But you can buy additional homeowners insurance coverage for your pool. Unless you notify your insurance and purchase this policy, your policy will not cover the pool. Failure to notify the insurance provider of having a pool is a type of lie.
  • Trampolines: Like swimming pools, trampolines increase the risk of insurance providers. Therefore, most insurance carriers do not cover trampolines. Some homeowners may not want to pay higher insurance costs Learning from insurance that cover trampolines, so they may disclose that they have a trampoline.

See: Does Home Insurance Cover Water Damage?

When can falsehoods occur?

Material misrepresentation can occur when purchasing a policy or when submitting a home insurance claim. You may see a warning about product mishandling on insurance forms and claims forms.

The most important question is whether the misrepresentation is material or not. For example, mislabeling your home as built in 2004 when it was built in 2005 will have little effect on your policy being approved or paid.

On the other hand, failing to tell your homeowner’s insurance provider that you rent a room from a family member – which can affect how your policy is written – can be a scam.

Continue Reading: Everything You Need to Know About Homeowners Insurance Checks

Can my insurer cancel my insurance for lying?

Yes, most homeowner’s insurance policies clearly state that your policy will be void if things go wrong.

If you conceal or misrepresent, commit fraud, or knowingly lie, the insurance provider can cover you. The policies also state that if the carrier issues a policy or sets a premium based on material distortions, the insurer may cancel the policy.

Requirements: In some cases, misrepresentation can be considered a crime of insurance fraud. For example, if you intentionally set your home on fire to collect property insurance premiums but file a claim claiming the fire was accidental, this could be insurance fraud.

Learn more: What to Do If Your Insurer Doesn’t Offer Your Homeowners Insurance

How to avoid being deceived by material things

You may be required to pay out-of-pocket damages if misrepresentation, whether intentional or not, results in policy cancellation or denial of a claim. Avoiding being deceived by material things is the best way. Here’s how to do it:

  • Be honest. The best practice you can do to avoid material distortions is always to talk to your home owners insurance provider. Whether you’re filling out an application, submitting an application, or talking to an agent, try to be honest.
  • Ask questions. It is important that you understand the questions you are answering when filling out a home insurance policy or application form. Clear up any doubts by asking your agent to clarify any questions or statements you are unsure of.
  • Listen to what is important to you. Review your policy agreement to make sure you understand what you need to disclose to your insurer. For example, if you want to put a trampoline in your yard, talk to your insurance provider in advance to make sure it will be covered.
  • Periodically review your schedule. Even if an agent works with you to fill out an application form, the process can be quick. In such cases, it is easy to accidentally send the wrong message. Pulling out your policy to review your claim can be a sensible way to protect yourself from being suspended.

Remember, homeowner’s insurance is meant to help you repair or replace your home if it is damaged or destroyed after an event. When an accident occurs, the last thing you want to happen is an insurance denial or cancellation of your policy.

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Disclaimer: All insurance related services are provided through Young Alfred.

About the author

Tim Maxwell

Tim Maxwell is a financial writer for over twenty years. Tim’s work has appeared in USA Today, Washington Post, Bankrate, LendingTree, Fox Business, Credible and more. He also publishes Incomist, a personal finance website that focuses on paying off debt and finding extra income in creative ways.

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