Importance of Disclosing Drivers on Your Auto Insurance Policy

September 15, 2024 | Written by Jerry Nicklow

What Happens If You’re Not Disclosing All Drivers or Pertinent Information on Your Auto Insurance?

When applying for auto insurance, it’s essential to provide accurate and complete information. While it may be tempting to leave out certain details or drivers to keep your premiums low, not disclosing important information can lead to significant issues down the road. Let’s explore what happens when you don’t disclose all the necessary information on your auto insurance application and how it can impact your coverage.

The Importance of Disclosing All Drivers

Insurance companies use the details you provide to assess the risk of insuring you and your household. One of the most crucial pieces of information is who will be driving the insured vehicles. Every licensed driver in your household should be listed on your policy, even if they only occasionally use the car. This allows the insurer to properly evaluate the risk and provide the appropriate coverage.

Not disclosing a driver—whether it’s a new teen driver, a spouse, or a roommate—means the insurance company is working with incomplete information. This can lead to problems, especially if the undisclosed driver is involved in an accident.

How Not Disclosing Drivers Affects Your Insurance

1. Claims Denial: If you haven’t disclosed all drivers and one of them is involved in an accident, your insurance company may deny the claim. The insurer could argue that the undisclosed driver was a material risk that they were unaware of, which could invalidate your policy.
2. Policy Cancellation: When an insurance company discovers that important information, such as drivers or vehicle usage, was not disclosed, they may cancel your policy. This could leave you without coverage and potentially make it harder to obtain insurance in the future.
3. Higher Premiums: If the insurer finds out later that there was an undisclosed driver, they might retroactively adjust your premium to reflect the higher risk. This could result in a large bill for back premiums or higher future costs.

Other Key Information That Must Be Disclosed

In addition to listing all drivers, it’s important to disclose other pertinent information that affects your auto insurance, including:

1. Primary Driver: Always identify who the primary driver of each vehicle is. Even if another household member uses the car occasionally, insurers need to know who drives it most frequently.
2. Address and Location: Your address significantly impacts your insurance rate. Premiums can vary based on whether you live in a rural or urban area, so it’s important to use your correct residence. Providing a different address, such as a relative’s home in a lower-risk area, can lead to complications.
3. Vehicle Use: It’s also important to accurately describe how the vehicle will be used. If you use your car for business purposes, such as for ridesharing or deliveries, this needs to be disclosed. Business use typically requires different coverage than personal use, and failing to mention this can lead to claim issues.
4. Annual Mileage: Insurers factor in how much you drive annually when setting premiums. Underreporting your mileage to save money might seem harmless, but if an accident occurs, discrepancies could raise red flags and lead to claim denial.

The Consequences of Not Disclosing Information or Drivers

Failing to disclose important information can lead to significant consequences:

1. Claims Issues:  If you haven’t fully disclosed all relevant information, your insurer may deny claims or offer reduced payouts.  This could leave you to cover the costs out of pocket.
2. Coverage Gaps: Incorrect or incomplete information can lead to gaps in your coverage.  Meaning you might not be fully protected in the event of an accident.
3. Legal Risks: It certain cases, this could be viewed as insurance fraud. Withholding information can lead to legal complications, especially if the lack of disclosure is considered material to the risk assessment.  And the threshold to consider insurance fraud as a felony is pretty low.In Maryland, the threshold between insurance fraud being classified as a misdemeanor or a felony is determined by the value of the fraudulent act. Specifically:
   • Misdemeanor: If the value involved in the fraudulent act is less than $300, it is classified as a misdemeanor.
   • Felony: If the value involved is $300 or more, it is classified as a felony.

   Penalties for a misdemeanor can include imprisonment for up to 18 months and fines, while felony charges can lead to harsher penalties, including up to 15 years of imprisonment and significant fines​

   Not disclosing a driver, or not being truthful about wher the car is garaged could easily cross over the $300 threshold.  So it is best to be hionest with your insurance agent to avoid any legal issues.

4. Difficulty Obtaining Future Coverage: If your policy is canceled or you face other issues due to nondisclosure, future insurers may consider you a higher-risk client.  This can lead to higher premiums or difficulty getting coverage.

How to Ensure You’re Properly Covered

To avoid the risks associated with not disclosing all pertinent information, follow these best practices:

1. Review Your Policy Regularly: Make sure all drivers and their roles are accurately listed on your policy. Update your insurer whenever there are changes, such as a new driver or different vehicle usage.  If a family member moves back into your home, please let your agant know right away.
2. Be Transparent About Vehicle Use: Whether you use your car for commuting, business, or pleasure, disclose this information to ensure you have the right coverage.
3. Provide Accurate Mileage Estimates: Give a realistic estimate of your annual mileage to avoid issues later.
4. Consult with Your Insurance Agent: If you’re unsure about what information to provide, it’s always a good idea to consult with your insurance agent. They can guide you through the process to ensure you have the coverage you need.

Conclusion

Not disclosing all drivers or pertinent information on your auto insurance policy might seem like a harmless way to save money.  But it can lead to serious complications. Ensuring that your insurer has complete and accurate information will help protect you and your loved ones.  This will provide peace of mind and avoid potential legal and financial issues.