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Auto Insurance Fraud: What are the Consequences?

Auto insurance fraud has become an increasingly serious problem in the US. In fact, car insurance fraud costs insurance agencies billions of dollars every year. The bad news is that they compensate for those losses for by charging high premiums to their members. That makes it very likely that a portion of your premiums is or has been used to pay for the cost of someone else’s insurance fraud—even if you’ve never committed any fraud yourself!

To keep your auto insurance policy rates affordable, you need to know exactly what constitutes fraud—especially because some of it may come as a surprise. Stay with us as we take a look at common types of car insurance fraud—as well as the financial and legal consequences of each.

What Constitutes Car Insurance Fraud?

Auto insurance fraud is an illegal act in which someone lies or intentionally misrepresents facts related to a claim for the purpose of financial gain. Because it’s so common within the insurance industry, providers work hard to investigate and expose fraudulent insurance claims. The exaggeration of injuries after an accident is the most common type of auto insurance fraud. However, there are two main categories for car insurance fraud—hard and soft:

Common Convictions for Car Insurance Fraud

When you file a claim, your insurance agent will assign a claims adjuster to follow up on your case. The adjuster’s job is to investigate your claim and ensure that nothing about it is fraudulent. If any fraud is found in your claim, it will be immediately denied. Depending on the severity of the fraud, your insurer may drop you from your insurance, or even pursue legal action against you. 

The penalties for insurance fraud vary widely depending on the state where it occurred, the amount of money fraudulently sought or obtained, and the criminal history of the defendant. In the eyes of the law, it will be categorized as either a misdemeanor or felony, depending on the severity of the fraud. Here are the consequences of each penalty:

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Frequently Asked Questions

What Happens if Someone Makes a False Car Insurance Claim?

If your car insurance provider finds that a person made a fraudulent claim on their auto insurance – they will most likely cancel the coverage policy and no longer insure them in the future. If the fake claim is severe enough, the insurance company may even issue a lawsuit or get law enforcement involved to handle the issue.