By Sheryl Smolkin
Read this article and comments at Moneyville.ca
The ninth commandment is “Thou shalt not bear false witness.” It means you shouldn’t lie. But when it comes to insurance applications, not everyone got the memo.
The vast majority of Canadians invest in some form of insurance. But a recently released TD Insurance survey reveals that 14 per cent of Ontario residents and 21 per cent of Canadians under 35 admit they have purposely lied or omitted important facts when filling out an insurance application.
The survey was commissioned by TD Insurance to identify Canadians’ understanding of the full spectrum of insurance products including auto, home, credit and life insurance. But TD Insurance VP Harry Blumenthal says the degree of non-disclosure by Gen X and Gen Y survey participants was one of the biggest surprises.
Lying on car, home insurance and life insurance applications is most common.
For example, Blumenthal says:
– In auto insurance applications people may try to hide previous losses or convictions.
– In home insurance, clients may not divulge that they have done a major renovation, operate a home daycare or take in roomers.
– When it comes to life and health products, applicants may neglect to mention a pre-existing condition.
Even if an insurance policy is issued based on incomplete or inaccurate information, the problems really begin when a claim is made.
Where information was withheld and there is a car accident, the claim can be denied and the policy can be cancelled . Furthermore, future premiums may increase or future insurance may be denied altogether.
If a homeowner’s insurance policy doesn’t reflect renovations and there is a fire, the house will not be insured for its full replacement value. Some companies may even retroactively cancel the policy if they view the size of the premises or the fact that it had a daycare or some other commercial business as significant enough that they would not have taken on the risk at the outset.
In worst case scenarios, withholding information on insurance applications may be insurance fraud, which is a criminal offence punishable by up to 10 years imprisonment in cases involving over $5,000.The purpose of buying insurance is to secure protection against the risk of loss. Blumenthal says it is encouraging that most Canadians recognize the need to be honest about their needs and personal circumstances when they request a quote. But those who do not, could have a rude awakening when they find out they have inadequate coverage or no coverage at all for a catastrophic loss.