Times are tough, and that insurance premium puts a real dent in the monthly budget.
So the next time you sign up with a new insurance company, perhaps you will neglect to mention that your 16-year-old son regularly drives your car.
Or maybe you will tell your insurer that you live with Aunt Gin, who has a home in a neighborhood across town where insurance rates are known to be lower.
Lying about such circumstances might save you a few bucks in insurance costs. But it is a bad idea, says Janet Patrick, spokeswoman for the Illinois Insurance Association.
"An individual commits insurance fraud when he or she lies to an insurance company," she says.
And in some cases, such dishonesty will get you more than a gentle rap on the knuckles, says Frank Scafidi, spokesman for the National Insurance Crime Bureau.
"Insurance fraud is a crime," Scafidi says.
Many ways to be tempted
The opportunity to fib – and to commit insurance fraud – creeps up at many points in the relationship with your insurer. For example, you may withhold details during the application and underwriting process, Patrick says.
"In this case, the individual provides inaccurate information to get a lower rate," she says.
Perhaps you do not accurately report how many miles you drive to work each day. Or, maybe you use the car regularly for business purposes without informing your insurer of the fact.
Lori Conarton, spokeswoman for the Insurance Institute of Michigan, says, "One common misrepresentation is when the applicant indicates they have no traffic tickets or accidents."
Insurance fraud also can occur during the claims process, Patrick says.
"A common example is 'padding' or 'inflating' claims for more than the actual amount of damages," she says.
The potential consequences of such misrepresentation vary from state to state and company to company.
In a best-case scenario, committing insurance fraud simply jeopardizes your coverage, or triggers an increase in your premium, when the dishonesty is discovered.
"Depending on the nature of the misrepresentation, the insurer may opt to adjust the rate, cancel coverage midterm, or nonrenew the policy," Patrick says.
This type of fraud also could void a claim. For example, if your teen crashes your car, the damages may not be covered if you failed to add the teen to the policy.
Conarton says, "Every insurance policy includes a misrepresentation clause, which allows the insurance company to void the coverage if it can be determined that the policyholder concealed information."
That is because a failure to disclose the information affects the insurer's ability to properly underwrite and price the policy, she says.
In a worst-case scenario, shading the truth about your insurance particulars could place you in legal hot water, depending on your state's laws, Scafidi says.
"Lying on an application for insurance could be an offense that leads to some jail time," he says. "It depends on the state, but most states view that as a crime."
Insurance fraud is a specific crime in every state except Alabama, Oregon and Virginia, according to the Coalition Against Insurance Fraud.
And even in those states, "it might be prosecuted under a different statute if a state lacks specific legislation prohibiting insurance fraud," Scafidi says.
Laws vary, but can be tough. For example, in Michigan, insurance fraud is considered a felony punishable by up to four years in prison and a maximum fine of $50,000.
While actively lying is bound to get you in trouble, Scafidi says you also may be committing fraud simply by failing to tell an insurer about a change in your circumstances – such as adding a driver to your policy.
"That's a circumstance that depends largely on the language of the company's policy," he says. "It may be something that could be a crime, but it really depends on the specific elements of each case."
To avoid any chance of getting into such trouble, Scafidi urges policyholders to promptly report any change in circumstances to an insurer.
"(The) best thing to do is always keep your insurer informed of any changes that affect your coverage," he says.
Your brother's insurance keeper
If all of this leaves you unfazed, perhaps a call to civic duty will cause you to reconsider lying to your insurer, Patrick says.
"Lying to an insurer ultimately affects everyone's pocketbook," she says.
The Coalition Against Insurance Fraud estimates that such crimes total $80 billion annually, and drivers everywhere ultimately bear those costs.
"Insurance premiums increase as insurers pass along added costs for overpaid claim settlements, special fraud investigation units and legal fees," Patrick says.
Such facts should dispel the notion that insurance fraud is a problem the merely impacts multi-million dollar insurance companies.
"Insurance fraud is not a victimless crime," Patrick says.