What Is Concealment in Insurance?

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Insurance fraud isn’t always intentional. In fact, it can happen accidentally through concealment, which is when you keep certain information from your insurer. But even if it’s unintentional, this can have serious consequences.

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

What is concealment in insurance?

Concealment in insurance occurs when you fail to reveal relevant information or hide it from an insurance carrier. This information can have a direct impact on the terms of an insurance policy, including your premium or insurance payouts. Concealment in insurance may happen when you fill out an application for a policy or any time after your policy is active.

If your insurance provider asks you a question and you reply with an answer that you’re unsure of, you may commit concealment by accident. This is a serious issue, as your insurer can’t make reasonable financial decisions unless you provide accurate information.

Important: Whether it’s intentional or not, concealment in insurance is a form of insurance fraud.

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Examples of concealment in insurance

A couple examples of concealment in insurance include:

  • Providing false information on an insurance application: If you apply for a home insurance policy, and you’re asked whether you have certain safety devices like a security system or fire sprinklers in your home, saying yes even though you don’t have any of these devices is a form of concealment. Misrepresenting yourself to get a discount can get you in trouble.
  • Lying when filing a claim: Let’s say a storm damages your roof. If you tell your insurer that your home’s siding was also damaged by the storm, even though it was already damaged before the storm hit, you’re committing concealment.

Concealment during warranty

A warranty in an insurance policy is a promise by the insured party that the statements you make are true. If you lie to your insurer, it invalidates these warranties.

Let’s dive into the two types of insurance policy warranties:

Affirmative warranty

An affirmative warranty is a statement that’s true at the time an insurer issues a contract. If you commit concealment during an affirmative warranty, the contract becomes invalid immediately.

Example: Let’s say you apply for an insurance policy and state that your home was built within the last 10 years, even though it’s much older. This would invalidate the policy right away, even though your insurer may not find out about the inaccurate statement for some time.

Promissory warranty

A promissory warranty is a statement about future facts that will either remain true or become true. If you commit concealment of a promissory warranty, your policy won’t become invalid right away.

However, the insurance carrier can cancel coverage any time a promissory warranty becomes false.

Example: If you agree to tell your insurance provider if you ever get a pool in your backyard but fail to do so when it happens, your provider has e the right to eventually cancel your policy or deny your claims.

Can my insurer cancel my policy due to concealment?

The short answer is yes. Concealment is considered a type of insurance fraud, regardless of whether or not you know you committed it. The main consequences of concealment are policy cancellation or insurance claim denial.

This can be a recipe for disaster if the unexpected happens and you need coverage. You could even face jail time or hefty fines in some states. That’s why it’s important to always be honest and upfront with your insurance carrier, even if it leads to higher premiums. If you’re unsure of something, don’t hesitate to let your insurer know and it’ll work with you to find an accurate answer.

What to do if your insurer cancels your policy for concealment

If your home insurance provider cancels your policy due to concealment, follow these steps:

  • Wait for a cancellation notice: Insurance carriers typically must send a cancellation notice to a policyholder 30 to 45 days before their coverage ends. The notice should explain the reason for the cancellation. If you receive a notice that states you committed concealment and you disagree, you can appeal the cancellation.
  • Shop for a new homeowners insurance policy: Even if you do contest the cancellation, you should shop around for a new policy to avoid a lapse in coverage. Be sure to compare home insurance quotes from multiple carriers so you can find the ideal option for your needs.
  • Consider a FAIR Plan: If you can’t find coverage with a new insurance provider, a Fair Access to Insurance Requirements (FAIR) Plan might be a good option. FAIR is a state-run program that offers insurance for high-risk consumers. While a FAIR Plan is usually more expensive than a standard policy and has limited coverage, it’s better than no insurance at all.
  • Look into surplus lines: Surplus lines are made up of highly specialized insurance providers that offer coverage you can’t find elsewhere. These should be a last resort and will depend on where you live. If you’ve been rejected by at least three insurance carriers, you may want to explore this option.

Keep Reading: What to Do If Your Insurer Doesn’t Renew Your Homeowners Insurance

How could concealment affect my insurance claim?

If an insurance provider finds out you’ve concealed something, it’ll deny your claim. You may also be convicted of a felony crime. Depending on your unique situation and where you live, this could result in fines and prison time. You might also lose your right to vote.

What if I unknowingly concealed something?

It’s possible to conceal something without knowing. Let’s say you fill out a home insurance application and state your property is worth less than it is because you simply don’t know its value. In this scenario, you’ve committed concealment.

Unfortunately, an insurance carrier can still invalidate your policy, even though the concealment was unintentional. Always be honest and work with your insurance carrier or do some research if you’re unsure about something that affects your home insurance policy.

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

About the author

Anna Baluch

Anna Baluch is a personal finance freelance writer with years of experience writing for well-known media outlets in the business and personal finance space. Her work can be found on media outlets like The Balance, Freedom Debt Relief, LendingTree, Credit Karma, Nav, and RateGenius. She holds a bachelor’s degree in marketing from Northwood University and an MBA from Roosevelt University.

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