***this is a legitimate question, and I’m leaving names out so there are no violations. Please set personal opinions aside when replying. ***
I recently heard of a NY businessman who received a fine in NY civil court for inflating the values of his assets to “banks and insurance companies” to get better rates.
I understand how inflated values would help him get a lower interest rate on a bank loan, but how does inflating the value of an asset to an insurance company help him get lower premiums?
I would assume a higher “value” would attract a higher premium since the insurance company is risking a larger loss.
In: Economics
For banking, I will also add that borrowing 200 million in a 400 million building, with inflated value, will allow you to get a much, much lower interest rate on the loan, because it looks safer to the bank than it actually is.
A NY business man who was recently fined for inflating the value of the assets, was fined equal to the interest rate savings that was illegally gained by misstating the value of his assets.
i don’t know as much about insurance, and I’m not sure why it would help, unless something to a property that was already insured.
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