4 Common Mistakes That Could Cripple An Auto Insurance Policy

It’s understandable with economic conditions the way that they are why someone would want to save money whenever and however they can. But there is a fine line between wisdom and corruption, and if an insurance customer crosses that line, it can mean big trouble as far as their policy is concerned. A Yahoo! report recently made this readily apparent when it revealed some of the most common ways that customers lie to or mislead their insurance companies. Here’s a quick sampling.


One: Hiding A Teen Driver.


Teen drivers are expensive. They’re less experienced and more accident prone by nature, and the demographic data consistently proves they file more claims and that those claims are often more expensive to complete. So if an insurance customer has a young person coming of age, they might feel the need to hide this information for as long as they can to save a few extra dollars. Big mistake. From the report:


“… insurers are permitted to consider all household residents when they price a policy, including a teen. Withholding information about your teen driver from your car insurance company is a big no-no. And insurers have ways of finding out. They can pull reports that identify ‘hidden’ household members. One such report from LexisNexis looks for ‘undisclosed’ newly licensed drivers between ages 15 and 25.  If your insurer finds out about your licensed teenager this way, it can revise your premiums to include the young driver, or decide it doesn’t want your business anymore.”


While the insurance company may still cover an accident in which the customer’s teen is involved, it’s important that customers know the company is within its legal right not to do so.  Either way the customer could end up paying back premiums on the teen driver, or they could legally be dropped altogether. So yes, teens are more expensive, but it’s better than the alternative of deceiving the insurer.


Two: Allowing Adult Child To Take A Car They Don’t Own Out-Of-State.


Say your customer has a child out of state going to college. Nothing other than location on one car has changed about the policy, so they don’t feel the need to inform. (Or they know they’re supposed to and don’t, either way.) This is a deceitful practice because it fails to inform the insurance company of an obvious change in risk factors. Obviously, the adult child will be at less risk driving in a small, two-lane kind of town than they would be in a larger, metropolitan area while hundreds of miles away from home. It’s just a different situation, and one that customers need to be mindful of before they do something that might jeopardize their coverage.


Three: Lending The Car To A Friend For Several Months.


Again, it’s not the act itself that a customer’s insurance company has a problem with; it’s the failure to report the change in risk factors. As with number two, lending the car to a friend for several months could significantly change risk factors — enough so to warrant a change in rating. After all, the friend may have a more reckless or unlucky driving history. The fact that the car is spending more time with them than the customer — much more time in this case — means that an accident is more likely to occur.


Four: Letting A Buyer Make Payments While Seller Keeps Name On Title And Insurance.


This point is wrong for so many reasons, as Yahoo! points out. From the report:


“First, as the owner – because your name is still on the title — you have vicarious liability for the actions of the person driving the car that you “sold.”


“Second, you’re paying for insurance but any claims might not be covered. Your car insurance policy normally covers cars and drivers of your household, not others.


“If you’re in this situation, you should sign the title over to the new party. He can easily get insurance once he registers the car — and you will no longer be held responsible for his actions. To protect your interest in the car, make certain you’re listed as the lienholder on the car’s title and auto insurance policy.  That way you’ll be notified if he tries to sell the car or drop car insurance.”


In Summary

Not every deception has to be intentional, but regardless of the motivation behind it, it can spell big trouble for insurance customers. As an agent, you want a clientele you can count on, so feel to use this in furthering the education of your auto insurance leads & customers. And for more of the most common car insurance mistakes that people make, check out Yahoo!‘s article.

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