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What is material misrepresentation in home insurance?

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When buying a homeowners insurance policy or filing a claim, it’s important to be completely honest with your insurer. Misrepresentation of facts can have a substantial financial impact on both insurers and policyholders.

As an insured, misrepresentation of the facts may result in a claim denial or denial of coverage. Knowingly misrepresenting facts to obtain a benefit to which you are not entitled is considered insurance fraud and can be charged with a felony.

Here’s what you need to know about material misrepresentation in insurance:

Material misrepresentation in insurance

“Material misrepresentation” is a fancy way of saying that you gave your insurer information that was false (intentionally or unintentionally), or intentionally left out important information. If a misrepresentation is intentional and material, your insurance policy may be voided by your insurance provider.

Insurers take this seriously because misrepresenting the truth about yourself or your home can affect your insurance premium, or even whether an insurance company would approve a policy for you in the first place.

Two types of material misrepresentation in insurance:

  • Lies by omission: Hide important information to deceive
  • Commission Lies: Intentionally providing false information

In other words, knowingly withholding information and lying meet the standard for material misrepresentation and the consequences that come with it.

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Examples of material misrepresentation

While some omissions or misrepresentations may seem harmless, it’s not worth risking a claim denial to save a few bucks on your premium. After all, the purpose of insurance is to have coverage when you need it most.

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

  • Property value: Some homeowners may lie about the actual value of their property to get a lower premium.
  • Rent to tenants: In some cases, a landlord may not live on the property and instead rent the house to tenants. Other times, the owner may rent a room in the house as a short-term rental. Either way, hiding this information from your insurer is a material misrepresentation.
  • Home improvements: Whether intentionally or unintentionally, many homeowners fail to notify their insurance company about renovations or additions that may increase their home’s property value. However, not including the additions in the policy means that they will not be insured if they are damaged.
  • Dogs: Homeowners insurance providers paid $675 million in liability claims for dog bites and dog-related injuries in 2018, according to the Institute of Insurance Information and State Farm. Homeowners insurance providers generally do not cover certain breeds, including Pit Bulls, Rottweilers, German Shepherds, mongrels, and American Bulldogs. Lying about owning one of these dog breeds is a material misrepresentation.
  • Swimming pools: Swimming pools have the potential for serious accidents. But you can purchase additional homeowners insurance coverage for your pool. Unless you notify your insurer and purchase this specific coverage, your policy may not cover the group. Not telling your insurance company about having a pool is a form of misrepresentation.
  • Trampolines: Like swimming pools, diving boards increase the liability risk of the insurance provider. Consequently, many insurance companies do not cover trampolines. Some homeowners may not want to pay the higher insurance costs for coverage from insurers that do cover trampolines, so they may not disclose that they have a trampoline.

Verify: Does home insurance cover water damage?

When can material misrepresentations occur?

Material misrepresentations can occur when you purchase a policy or file a home insurance claim. You may see a warning statement about material misrepresentation on insurance applications and claim forms.

The critical question is whether or not a misrepresentation is material. For example, mistakenly listing your home as built in 2004 when it was actually built in 2005 may have little bearing on your policy acceptance or premium.

On the other hand, failing to tell your homeowners insurance company that you rent a bedroom to a relative, which could affect how your policy is underwritten, could constitute a material misrepresentation.

Keep reading: Everything you need to know about homeowners insurance claim checks

Can my insurer cancel my insurance policy for material misrepresentation?

Yes, many homeowners insurance policies explicitly state that your policy will be void in the event of a material misrepresentation.

If you conceal or misrepresent the facts, engage in fraud, or intentionally lie, your insurer may terminate your coverage. These policies also provide that if an insurer issues a policy or sets a premium rate based on a material misrepresentation of fact, the insurer may cancel the policy.

Important information: In some cases, a material misrepresentation may be considered a criminal act of insurance fraud. For example, if you intentionally set your home on fire to collect a property insurance payment but file a claim that the fire was an accident, this would constitute insurance fraud.

Learn more: What to do if your insurer doesn’t renew your homeowners insurance

How to avoid material misrepresentation

You may be required to pay out-of-pocket damages if a material misrepresentation, whether intentional or unintentional, leads to policy cancellation or claim denial. Avoiding material misrepresentation altogether is the best option. This is how you do it:

  • Be honest. The best habit you can practice to avoid material misrepresentation is to always be completely truthful when you contact your homeowners insurance provider. Whether you’re completing a policy application, filing a claim, or speaking with an agent, do your best to be honest.
  • Ask questions. It is important that you understand the questions you are answering when completing a home insurance application or claim form. Clear up any doubts by asking your agent to explain any questions or statements you are unsure about.
  • Understand what is required of you. Review your policy contract to make sure you understand what information you need to report to your insurer. For example, if you plan to put a trampoline in your yard, talk to your insurance company beforehand to make sure it’s covered.
  • Periodically review your policy. Even when an agent works with you to complete a policy application, the process can be rushed. In these situations, it’s easy to unintentionally submit incorrect information. Taking out your policy to double check your statements can make sense as protection against misrepresentation.

Remember, homeowners insurance is intended to help you repair or replace your home when it is damaged or destroyed after a covered event. When disaster strikes, the last thing you want to see happen is a denial of insurance coverage or a cancellation of your policy.

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

About the Author

Tim Maxwell

Tim Maxwell is a financial writer with more than two decades of experience. Tim’s work has been featured in USA Today, Washington Post, Bankrate, LendingTree, Fox Business, Credible and more. He also publishes Incomist, a personal finance site that focuses on paying down debt while earning extra income in creative ways.

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