A recent study showed that more than 30% of those who responded lie about their driving record when applying for auto insurance. Close to another 30% lie about their address. Twenty-six percent lie about use of the vehicle, and another 26% lie about the number of drivers of the vehicle, ticket history, and 18% lie about who is the car's primary driver.

Survey respondents indicated that they lied on insurance applications in order to get a cheaper premium. But lying on an application may have deeper implications than merely giving the insured a break on insurance premiums. Individuals that lie on an application and get away with it only increase the premiums for all other insureds. Let's follow an application through the process.

All insurance applications carry a fraud statement that declares that any misrepresentations made with the intent to defraud the company will void the policy. These statements may vary by company and state, but insurance fraud is such a large issue that such statements should be expected on any application. Fraud costs the industry $40 billion a year, and misrepresentations on auto applications accounts for $29 billion of that. Insureds pay between $400 to $700 in additional premium per year because of insurance fraud.