What Is Material Misrepresentation On Renters Insurance? Img ©
What Is Material Misrepresentation On Renters Insurance?
When you fill out an application for renters insurance, you’re stating or representing that the information you have provided is true and correct to the best of your knowledge. If you represent something to be true that is not, like the type of dog you have or the number of previous claims you’ve had, that’s misrepresentation.
What makes it material misrepresentation? The error, omission, or lie must be material to the policy or the risk. That means it must have bearing on whether the policy would have been issues or what premium would be charged. Omitting your spouse’s name is not material. Omitting that you have a Pit Bull is very much material misrepresentation
Why Is Material Misrepresentation Important?
The company decides whether or not to issue your policy and at what price based on the amount of risk that’s being taken on. That’s what a renters insurance policy is, the transference of risk from you to the company. If you make a material misrepresentation, it may influence the company to issue a policy that they wouldn’t have issued if they had had all of the relevant information.
It may also influence them to issue the policy at a lower price than they would have. Insurance only works properly when the correct premium is charged for a given set of risk. Determining that risk is dependent on the information you provide, as well as on additional information from reports and other sources.
If you make a material misrepresentation such as saying that you don’t have a pool, or that your pool is fenced when it’s not, there’s a significant liability exposure that’s not being properly rated because anyone could stumble into your pool – a child, or even a drunk who’s lost – and be injured or killed. The company needs to know that exposure is there in order to charge the correct price for coverage.
Most of the things that people commonly misrepresent wouldn’t result in significant changes in premium, but the change is significant enough to matter to rating the policy. Some underwriters are particularly picky about certain underwriting factors, and simply won’t issue a policy at all if they know that a certain type of risk is present. Perhaps a fenced pool is acceptable, but a diving board is not acceptable even within the fence. Full disclosure is the only way to be sure you’re getting the coverage you’re applying for.
What Are The Consequences Of Material Misrepresentation On Renters Insurance?
First of all, material misrepresentation is, or can be, insurance fraud. That brings with it its own set of consequences, and they’re most definitely not the sort you want to deal with. Enough said on that one.
In cases of material misrepresentation, coverage for a loss can be denied. If you didn’t mention that you had a breed of dog that the insurer wouldn’t cover, or for which a higher premium would have been charged, you may find that you have no coverage for a loss caused by the dog that you failed to mention. You don’t want to pay out of your own pocket for that loss, do you?
Equally important, if coverage is denied for a loss because of material misrepresentation, you’ll also find that you have no coverage for defense. If the dog you forgot to mention bites someone, you’ll not only want liability coverage, but also for the insurer to defend you against that suit. That’s part of the policy, and that’s what you’re paying for.
But if there is no coverage for the loss because of your omission, there is no duty to defend on the part of your insurance company. This would mean that you would have to find your own lawyer, and pay for that lawyer, as well as paying for the medical bills and other aspects of that loss out-of-pocket rather than your Eugene, OR Renters Insurance covering it.
This is not, of course, limited to lies about what kind of dog you have. Some insurers would consider lying about having children in the house to be a material misrepresentation, because children represent an additional liability risk which they believe should be priced accordingly. Make sure to ask if you don’t understand a question on the application, or if you don’t understand why it’s being asked or if it impacts rating or underwriting.
Don’t forget that if you aren’t honest on an insurance application, this can result in denial of coverage or cancellation of the policy for all insureds on the policy, potentially. That could leave your entire family wanting for coverage because you lied, or didn’t understand that a question was important. That can apply even if they had no way of knowing about your misrepresentation. That’s because the entire policy may not have been issued in the first place if there had been full disclosure of the level of risk.
How Can I Avoid Material Misrepresentation On Renters Insurance?
It’s simple. When you’re shopping for insurance, be honest when answering questions about the risk. Don’t lie, and don’t omit things that are obviously important. Give full and complete answers to questions on the application, and make sure that you inquire if there’s a blank that you’re not sure whether or not you need to fill in.
That’s what renters insurance experts are for, and Effective Coverage makes those experts available for you. If you want to call and ask in-depth questions, you’re welcome to – that’s what we’re here for. We’re happy to explain not only the coverage, but also why questions are asked, and whether a given question is relevant to your coverage or needs to be completed on a form. It’s up to you to be honest on your insurance application, but you’re always welcome to ask for clarification and help.
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