Most people buy insurance hoping they will never need to use it. But when a fire, theft, or other major loss happens, they trust their policy will help them recover.
Imagine your car is stolen or your home burns down. You may be dealing with damaged property, unexpected bills, and a life turned upside down. You contact your insurance company and begin making a claim, believing your coverage will help you put things back together.
Then the insurer finds a problem. Important information on your application was incorrect or incomplete. Perhaps something changed after the policy began and the insurer was never told. The insurer may even discover that false information was provided during the claim.
Suddenly, you are not only dealing with the loss. Some or all of your claim could also be denied when you need the help most.
This is why misrepresentation is so serious. It does not always begin with an elaborate lie. It can start with an incomplete answer, an incorrect assumption, or an important change you did not realize needed to be reported. In more serious cases, someone may knowingly hide information or exaggerate a claim.
We value transparency. That is why we have put together this overview on what insurance misrepresentation is, what it can look like, and what the ramification can be.
Misrepresentation happens when incorrect, incomplete, or misleading information is given to an insurance company. It may happen when you:
Some cases involve a deliberate lie. Others may begin with an assumption, an incomplete answer, or something the customer did not think was important.
However, not every small mistake will cause a policy or claim to be denied. The information usually needs to matter to the insurance company’s decision. This is known as material information.
Material information is information that could affect how an insurance company views the risk.
Here is a simple way to think about it: Would the insurance company have made a different decision if it had known the truth? With the correct information, the insurer might have:
If the information could have affected one of these decisions, it may be material.
There are three important times when you need to be open with your broker and insurance company.
An insurance company uses your application to decide if it can insure you and how much your coverage should cost. For home insurance, you may be asked about:
For auto insurance, you may be asked about:
A wrong answer could affect the policy, especially if the insurer would not have offered the same coverage with the correct information.
Your information might have been completely accurate when you first applied. But life changes. You might:
Some of these changes may be material to your insurance.
Under Alberta’s insurance rules, an insured must promptly report a material change that is within their knowledge and control. If the insurer is not told, coverage related to that change may no longer apply. This could lead to a claim being denied. The insurer may also decide to change the premium or end the policy after being notified.
Reporting a change does not automatically mean your insurance will cost more. The insurer may simply update the policy, change the premium, add coverage, or move you to a more suitable insurance product.
The dangerous choice is staying quiet and hoping the change never matters.
You must also be honest when reporting a loss. That means being accurate about:
Adding items that were not stolen, increasing the value of damaged property, inventing expenses, or providing false income information can put the entire claim at risk.
A claim is not the time to guess, exaggerate, or “round up.”
In some cases, yes.
An Alberta court case called Abbas v. Esurance shows how serious a false statement can be. After a car accident, the insured made more than one claim under his policy. He provided false employment information to receive income replacement benefits.
He argued that the false information should only affect that one benefit. His other claim was for a different type of coverage. The Alberta Court of Appeal disagreed. It ruled that the false statement could affect all benefits connected to the same accident.
In simple terms, lying about one important part of a claim could put the entire claim at risk. In the case of Abbas, the entire claim was denied.
Alberta’s Insurance Act also says an insured person may lose the right to payment if they commit fraud or knowingly provide false information about an insurance claim.
No. The false information must matter to the claim.
The court gave a memorable example. Imagine someone says their belongings were stolen from their car while they were having dinner with their wife. In truth, they were having dinner with their mistress.
That lie may cause trouble at home, but it does not change the insurance claim. The belongings were still stolen. The dinner companion does not change what was in the car or what the stolen items were worth.
Now imagine the person claims there was an expensive laptop in the car when there was not. That lie directly affects how much they are asking the insurer to pay. That is a material false statement because it matters to the claim.
The insurance company does not need every private detail of your life. It does need the truth about what happened, what was lost, and what you are asking it to cover.
A similar issue appeared in an older Alberta case called Swan Hills Emporium & Lumber Co. v. Royal General Insurance Co. of Canada.
After a fire, the insured claimed several televisions had been destroyed. The insurer proved that the televisions did not exist. The strange part was that the real damage was already worth more than the policy would pay. Adding the fake televisions would not have increased the final payment.
It still mattered. The court found that adding items that did not exist could put the insured’s recovery at risk. The lie did not become harmless just because it would not have changed the final amount. In the case of Swan Hills Emporium, their entire claim was also denied.
The message from both cases is simple: Never add, hide, inflate, or change information during an insurance claim. A lie about one item could put the entire claim at risk.
An honest mistake is not automatically the same as fraud or a wilfully false statement.
People forget dates. They misunderstand questions. They may not know the exact age of a roof or remember every detail of a past claim. The result will depend on:
The outcome can also depend on whether the issue involves home insurance, auto insurance, or information provided during a claim. Not every mistake will cause a policy to be voided, but an important error should never be ignored.
If you discover a mistake, contact your broker right away. Correcting it before a loss happens is much better than waiting for an adjuster to find it during a claim.
The result depends on the type of policy, the information involved, and when it is discovered. Possible consequences include:
A cancellation or voided policy may also need to be disclosed on future insurance applications. This can lead to fewer options, higher premiums, or additional questions from another insurer.
Contact your broker if you are not sure whether a change matters. Important changes may include:
You do not need to decide whether the change is material. Tell your broker what happened and let the insurance company make that decision.
Insurance depends on both sides having the right information. Your insurer needs accurate information to understand the risk. You need clear information about your coverage, limits, and responsibilities.
Do not change an answer because you are worried about the price. Do not leave something out because you think it is unimportant. Do not add or exaggerate anything after a loss.
Transparency matters throughout the life of an insurance policy. Tell the full story when you apply, report important changes when they happen, and be completely honest when making a claim. A difficult conversation with your broker today could prevent a much more painful discovery after a loss.