What happens if someone lies on their homeowners insurance application?

Overview: 

• Lies can be anything from denying owning a trampoline to undervaluing property
• While an application may be approved, insurers can find out the truth years later when a claim is filed
• Your insurer can do anything from increasing rates to filing a fraud charge

Lying on a homeowners insurance application carries a wide range of consequences. Consequences depend upon the severity of the lie. While some inaccuracies are actually unintentional mistakes, this doesn’t mean that you won’t be dropped or have higher rates if the insurance company discovers them.

Lying about something on your home insurance application is never a good idea, even if it appears to save you a few bucks at first. The cost of lying can far outweigh the temporary savings. Read on to see what happens if someone lies on their homeowners application.

Make it a point to always tell the truth on your insurance application. Besides, if your goal is simply to find the cheapest home insurance then just enter your ZIP above and start comparing free insurance quotes!

What are the consequences of lying on your homeowners insurance application? 

Instead of shopping around for the best home insurance to find savings, some people may try to lie about home factors to cut costs. Several different outcomes may happen if people lie on their homeowners insurance applications. We’ve ranged them in severity below from least to most severe. 

• Higher rates. A homeowner may leave something off their application to get lower rates, such as if they have a dog breed considered dangerous. If the insurer finds out when checking the application, the best-case scenario is it may simply raise the rates to reflect the higher risk. 
• Denied application. An insurance company may outright deny your application if it finds out you lied. Any lie is grounds for denial, and you’ll be stuck without homeowners insurance. 
• Denied claim or low claim payout. Most commonly, insurers discover lies when homeowners file a claim later. If you lied about the value of your home to get a lower rate, your claim might be denied. Even if the lie isn’t discovered, you’ll receive a claim amount for the undervalued amount of your home, resulting in financial losses. 
• Canceled policy. If an insurer doesn’t find out about a lie right away but discovers it later, your insurer may immediately cancel your policy, leaving you stranded without insurance. 
• Fraud charges. The worst-case scenario is that an insurance company will bring fraud charges against you. Even if your application was approved, if the insurance company later has proof that you lied on your application or filed a fraudulent claim, it can take legal action. 

Lying on a home insurance application isn’t worth it to save a few dollars every month. It can cost homeowners a great deal of money. For example, a claim could be denied due to a previous lie, which means the homeowner won’t get any money at all for necessary repairs. 

Even if a homeowners insurance application is approved, it doesn’t mean that you are in the clear. There could be repercussions later. Insurers are well versed in checking for discrepancies on applications and claims, as insurance fraud is common.

A canceled policy or multiple denied claims can make it harder to find home insurance elsewhere at a low price, ultimately costing the homeowner more time and money than they would have spent by being honest on their application. 

Read more: Claims Adjuster: Insurance Explained

Common Lies on Homeowner Insurance Applications 

There are a number of lies homeowners may put on insurance applications, from omitting that they own a trampoline to homeowners lying about where they live. Some of the most common lies homeowners tell are: 

• Dog breeds. If homeowners own a dog breed that is deemed dangerous, such as a pit bull or rottweiler, they may lie about the dog’s breed to avoid higher rates on home insurance.

• Home renovations and additions. A homeowner may choose to lie and not tell their insurer about a new renovation or addition that raises the property value of their house. However, those additions won’t be insured. 

• Pools. Pools are a hazard and do result in higher rates, which is why some homeowners will attempt to lie about having a pool on their property. 

• Renting out property. A homeowner may not even be living at their property in order to rent it out, or they may rent out a room as an Airbnb and not inform their insurer. 

• Trampolines. Trampolines are a liability risk, so homeowners may deny having a trampoline on their property. 

• Value of the property. Homeowners may lie about the overall value of their property to receive lower rates. 

Because insurers are familiar with these lies, there is a good chance that they will catch any misrepresentation on an application or during a later claim. 

Case Studies: Consequences of Lying on Homeowners Insurance Application

Case Study 1: Undisclosed Prior Claims

In this case, a homeowner intentionally fails to disclose previous insurance claims while applying for a new homeowners insurance policy. A few months later, a severe storm damages the insured property, and the homeowner files a claim for the storm-related damages. During the investigation, the insurance company discovers the undisclosed prior claims and realizes the homeowner’s dishonesty.

As a result, the insurance company denies the claim and cancels the policy for material misrepresentation.

Case Study 2: False Information about Property Occupancy

A homeowner provides false information regarding the occupancy of their property on the insurance application. The homeowner states that the property is their primary residence when, in reality, it is a rental property generating income. A fire occurs at the property, causing significant damage, and the homeowner files a claim.

During the investigation, the insurance company uncovers the misrepresentation about the property’s occupancy. Consequently, the claim is denied, and the insurance policy is voided due to the homeowner’s dishonesty.

Case Study 3: Concealed Prior Property Damage

In this case, a homeowner conceals existing property damage when applying for homeowners insurance. They fail to disclose a leaky roof and water damage to their insurer. A few months later, a severe storm exacerbates the existing damage, and the homeowner files a claim. The insurance company initiates an investigation and discovers the concealed prior property damage.

As a result, the claim is denied, and the insurance policy is canceled due to the homeowner’s fraudulent misrepresentation.

Case Study 4: Omission of Home Business

A homeowner neglects to mention that they operate a business from their home on the insurance application. The homeowner experiences a break-in, resulting in the theft of valuable business equipment and inventory. While assessing the claim, the insurance company finds evidence of the undisclosed business operations.

Consequently, the claim is denied, and the homeowner’s insurance policy is terminated due to the intentional omission of crucial information.

Case Study 5: Inaccurate Valuation of Property

In this case, a homeowner deliberately undervalues their property on the insurance application to secure a lower premium. A catastrophic event, such as a wildfire, causes extensive damage to the property, and the homeowner submits a claim. During the claim investigation, the insurance company determines that the property’s value was significantly underestimated.

As a result, the insurance company adjusts the claim payout accordingly, reducing the reimbursement amount to reflect the accurate property valuation.

Case Study 6: False Information Regarding Safety Features

A homeowner provides false information regarding the safety features of their property, such as smoke alarms, security systems, or fire extinguishers, in an attempt to obtain a lower insurance premium. Subsequently, a fire breaks out at the property, leading to substantial damage. During the claim assessment, the insurance company discovers the homeowner’s dishonesty about the safety features.

As a consequence, the claim payout may be reduced or denied, and the homeowner’s insurance policy could be canceled for misrepresentation.

Final Thoughts Regarding Lying on a Homeowners Insurance Application

While some mistakes are just that — mistakes — some homeowners intentionally lie on their insurance applications. Homeowners lying about where they live can come with several repercussions. While there is a chance the insurer will never catch it, the more likely outcome is that the homeowner will face higher rates, denied claims, canceled insurance, or even fraud charges. 

If you are tempted to omit something in order to receive cheaper rates, it is much better and less risky to simply shop around with different insurance companies instead. A rate comparison tool can help you find affordable home insurance options that are within your budget. 

To find lower premium rates, ask about discounts and shop around with different insurance carriers. You can get free homeowners insurance quotes right now by entering your ZIP code below!