·  Legal News, Analysis, & Commentary


Common Types of Car Insurance Fraud

— June 25, 2021

Insurance premiums for car insurance can get very high, leading some drivers to try finding ways to reduce their rates. While it might seem like a reasonable thing to do, cheating your way into lower rates is a type of car insurance fraud.

In fact, there are several common types of car insurance fraud that drivers try to commit. Insurance companies are on the lookout for these methods, and they will do everything they can to prevent people from committing fraud.

Learn about the most common types of car insurance fraud and how to avoid getting in trouble for accidental fraud today.

What is Insurance Fraud?

Insurance fraud is when an individual deceives an insurance company so that they can receive some type of benefit. They may try to pay lower rates, or they may try to receive claim payouts for incidents that they should not receive payouts for.

In addition to car insurance fraud, fraudulent claims are also seen in home insurance and other insurance industries.

Insurance fraud is a serious crime. Individuals caught committing this crime may face significant fines or even jail time.

Hard vs. Soft Insurance Fraud

Types of automotive insurance fraud can be classified into two different categories: hard and soft fraud.

Hard fraud is when an individual does their best to intentionally get a claim payout; the penalty for this type of fraud is severe and can include jail time. Hard fraud actions include forced auto accidents and planned car theft.

On the other hand, soft fraud is when someone lies to get a better rate or intentionally leaves out information to pay less for their insurance policy. Over-reporting accidents, not including all driver names, and lying about your address are all types of soft fraud.

Common Types of Car Insurance Fraud

“Stolen” Car

One of the most common types of car insurance fraud is when a vehicle owner dumps a vehicle and then reports it as stolen. The owner hopes to receive an insurance claim payout for the car they got rid of by abandoning a car or otherwise disposing of it.

Image credit Thomas Hawk on Wunderstock (license).
Image credit Thomas Hawk on Wunderstock (license).

Vehicle owners that attempt this type of fraud often try to double their profits by getting an insurance settlement for the stolen car and then selling the original car. However, this type of fraud is difficult for owners to complete due to how traceable cars are in today’s world.

Registration Misinformation

Another common type of car insurance fraud is when people lie about where they live to get a lower rate on their insurance premiums. One factor of insurance premium calculations is where the vehicle owner lives, so lying about the address can often see a reduction in insurance rates.

Insurance companies may request additional documents to verify your address if this type of car insurance fraud is suspected at any time.

Over-reporting Repair Costs

After an accident, repair shops may overreport how much the repair costs will be. The repair shop bills your insurance company, and then they receive payment for that billing. If they exaggerate how much things cost, they will be committing fraud and making more money than they should.

Airbag Replacement Fraud

After an accident, some repair shops looking to commit fraud will not properly replace the airbag. They may use salvaged airbags to make the repair, or they may pretend that the airbag deployed when it did not deploy during an accident. If a repair shop is caught committing this type of fraud, the mechanic could face serious penalties and/or prison time.

Windshield Replacement Fraud

This type of fraud is one that often causes unsuspecting drivers to be involved in a fraudulent affair. In this scenario, a driver is approached by someone claiming that their windshield is damaged and needs to be repaired. The individual will offer to replace it and say your insurance will cover it. 

If caught up in this, your insurance rates may go up and you may need to have your windshield repaired again after they work on it. If you ever have an issue with your windshield, make sure you work with a verified windshield specialist to do any repairs. Do not fall victim to parking lot replacement fraud.

Avoiding Fraud on All Fronts

Beyond these types of car insurance fraud, there are some adjacent types of criminal activity that some individuals may try to do. Fraudulent personal injury insurance claims after car accidents have been known to happen, which can be a big issue for victims of staged auto accidents. 

All types of car insurance and personal injury insurance fraud are serious infractions that are handled with utmost seriousness by the law. There are even drivers that will try to learn how to get fake insurance to avoid paying premiums. However, this doesn’t work out in the long run and is dangerous to do.

Make sure that you are always truthful when filling out car insurance information, or you could end up facing charges for your lies.

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