NerdWallet's Smart Money Podcast - Are You Lying on Your Insurance Applications? Here’s What Could Happen

Episode Date: June 5, 2024

Discover how many people lie on insurance applications and the potential consequences you face when you do so. Is it okay to lie on your insurance application? What are the consequences if you do? Hosts Sean Pyles and Anna Helhoski discuss the findings from a recent NerdWallet survey revealing how many Americans admit to intentionally providing inaccurate information on their insurance applications and delve into the generational and gender differences in attitudes toward this behavior. Learn why people justify these lies and the potential legal and financial repercussions of being dishonest on your insurance forms. Then, they break down the latest money headlines, starting with a promising decline in delinquencies reported by VantageScore. They also discuss the IRS expanding its free filing software program and how a recent decline in grocery store prices could affect your bottom line. In their conversation, the Nerds discuss: insurance fraud, lying on insurance applications, insurance rates, saving money on insurance, insurance applications, insurance deception, financial honesty, life insurance, auto insurance, consumer debt, debt delinquencies, credit score, personal loans, credit card debt, IRS free filing software, Direct File, tax preparation, inflation, grocery prices, lowering grocery costs, Aldi discounts, Target discounts, Amazon Fresh discounts, financial news, insurance industry, high-risk hobbies insurance, marijuana habits insurance, insurance consequences, consumer finance, financial tips, money management, credit health, tax filing season, insurance coverage, and economic trends. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Welcome to NerdWallet's Smart Money Podcast. I'm Sean Piles. And I'm Anna Helhosky. And this is our weekly money news roundup, where we break down the latest in the world of finance to help you be smarter with your money. We'll go deep into a single topic and then leave you with the latest money headlines. Today, we're talking about honesty, specifically how honest people are with their insurance applications. That's right, Sean. There's a big difference between a little white lie and big old deception. According to the results of a new NerdWalt survey of more than 2,000 U.S. adults conducted online by the Harris Poll, one in five Americans admit they intentionally

provide inaccurate information on insurance applications. The most likely to fib are Gen Zers. 42% have said that they've lied on their applications, followed by 28% of millennials. The least likely to falsify their applications are baby boomers at 6%, followed by 17% of Gen Xers. So that's what people admit to doing, but do they think it's okay to do it? It seems to depend on the type of insurance. The survey found that 19% of Americans say it's totally fine to lie about the number of miles you drive each year in order to get a lower car insurance rate. But life

insurance seems to be a different story. About 17% said lying about smoking marijuana to receive a lower life insurance rate is a-okay. And interestingly, 15% said lying about tobacco smoking habits is fine. Meanwhile, only 14 percent said lying about high-risk hobbies or health data was acceptable. So it seems like people are less hung up about lying for certain things over others so they can save money on their insurance. But when you boil those down by gender and generation, you can really see where the divides are. Men are way more likely to say lying on insurance applications is okay across every category,

from miles driven to get a lower auto insurance rate to fibbing about income to get more life insurance coverage. Yeah, and by generation, as we mentioned, Gen Z was leading the pack in saying it's okay to lie to get a lower rate in nearly every category, except withholding your marijuana habits. Millennials were more likely to say that than any other generation. Now to the why. Why do people think it's okay to lie? Among those surveyed who said lying was acceptable, about 45% said it's pretty simple. I want to save money. Around 40% said they didn't think certain factors should be taken into consideration when calculating their insurance rate, while nearly the same amount of people said it's because their rates had already increased too much. Now, Sean, we get that some people are lying, and a lot of them say they have good reason to do it. In fact, about 18% of those who responded said they don't think there's any consequence to lying.

So is there? It depends. But if you are found out to be knowingly lying on a life insurance application, for example, your application could be rejected, your benefits might not pay out, and there could even be criminal charges. After all, lying to receive better rates on your insurance is a form of insurance fraud. The insurance industry says fraud costs them $308.6 billion a year. You might be saying, who cares about the insurance companies? Well, unfortunately, it's the consumers who end up losing when those companies try to recoup losses by charging higher rates. All in all, we here at NerdWallet advise you not to lie to your insurance company to get a lower rate because it could backfire. And, you know, lying is wrong. But we get that insurance can get really expensive. So we

also advise people to shop around and get a few quotes from different insurers to get the coverage that they need at the best price possible. Up next, a few money headlines from the last few days. So, Ana, we've reported over the last couple of years about how much credit card debt Americans have taken on in the wake of the pandemic and rising interest rates. That was coupled with a rise in delinquencies, people being 30 days or more late on their payments. Well, we have some indication that this trend might be reversing. Yeah, VantageScore, which is a credit scoring model used by the three major credit bureaus, releases a monthly analysis of the overall health of consumer credit in this country. Its APER report, which it calls Credit Gauge, showed a decline in delinquencies compared to March figures. That marked a second straight

monthly decline. The exception here was personal loans, but all other forms of credit saw a drop in delinquencies. Credit card balances remained flat from March. So maybe this is a hopeful sign that folks aren't using quite as much credit, and the credit they do use, they're paying off on time. Hear, hear. Keep it going, everyone. Sean, I know we just got past tax filing season and nobody wants to talk about it anymore, but there's some good news for filers. Good news coming out of the IRS? Someone alert the media. They did. And the news is that the agency is going to extend what was a trial program that offered free filing to taxpayers in several states. We mentioned this in an episode a few months back. The IRS started offering a free

tax preparation software program called DirectFile, but it was only available to people in 12 states. But now taxpayers in all 50 states will be able to use it. That is, if your state opts in. Right. In order for residents to be able to take advantage of DirectFile, their state will have to link its own system to it or create a system that can do so. state opts in. Right. In order for residents to be able to take advantage of direct file, their state will have to link its own system to it or create a system that can do so. Attorneys general in 12 states have sued the IRS saying the program wasn't authorized, but until a court says otherwise, it'll stay in place. The program also doesn't deal with more complex tax structures. It's really for folks with very

basic filings without things like itemized deductions or business income. But the IRS says that more than 140,000 people took advantage of the pilot program this year and had their returns accepted through it. Inflation has been one of the big financial stories of the last couple years. Grocery prices, for one, are 25% higher than they were in early 2020. 25%. That's according to the latest Consumer Price Index. That said, prices in April were down from March, so there's an indicator to hold out hope. And here's another. Last week, Walgreens joined the trend of several national brands, including Amazon Fresh, Aldi, and Target, touting lower prices and discounts. Some of the highlights, and you can check out NerdWallet's website for more details.

Aldi is cutting prices on more than 250 items for the summer all the way to Labor Day. And Target is dropping the cost of about 5,000 items, especially everyday staples from milk and bread to diapers and pet food. It also has a new store brand called Dealworthy, and most of those items are $10 or less. CNN reports that Amazon Fresh says it's bringing down prices on about 5,000 items both online and in-store. That includes discounts of up to 30% on normally spendy items like meat and seafood and cheese. Sounds like it's time for a summer picnic, Sean. I'll see you there. That's it for this week's Money News. We always

welcome your money questions and comments. Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. Or send us a voice memo at podcast at nerdwallet.com. And remember that you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeart Radio to automatically download new episodes. Today's episode was produced by Tess Biglin and edited by Rick VanderKnecht.

Sarah Brink makes our audio. Here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds.