What You Need To Know About Car Insurance Fraud

car insurance fraud and how to avoid it

While you may typically think of car insurance as a way to protect you in case of an accident, others may look at car insurance as a way to make money off of others.

Car insurance fraud occurs when someone purposely tries to gain money or benefits that they know they are not eligible to receive. 

Even if you do not participate in car insurance fraud, you can still be a victim of someone who does. By understanding these facts about car insurance fraud, you will be able to protect yourself better against anyone looking to victimize you. 

Examples of Car Insurance Fraud

When investigating car insurance fraud, insurance companies examine both false information and purposefully incorrect documentation [source]. 

A few examples of car insurance fraud include: 

  • Accidents that were staged
  • False injuries
  • Fake reports of vehicles being stolen
  • Concealing non-covered passengers driving at the time of the accident 
  • Filing claims for an accidents that happened before a policy took effect

Hard Fraud vs. Soft Fraud

Insurance companies and law enforcement recognize the difference between hard fraud and soft fraud. Hard fraud can actually result in prison time, and include any actions in which someone reports a fake loss for monetary gain. 

Soft fraud involves lying about certain aspects of a claim that would otherwise be legitimate. Someone failing to report all of the drivers who live in a house would be an example of a soft insurance claim. These types of reports can drive up the cost of insurance claims. 

How Hard and Soft Fraud by Others Can Impact You

An example of hard fraud by someone else affecting you occurs when an accident is staged. Someone can force you into a vehicle crash and have a planted witness claim you were at fault. 

Someone may commit soft fraud by lying about their location and using your address as theirs. This can impact you negatively if you try to apply for better car insurance rates, and they end up showing up on your address as living there and having insurance. 

Bodily Injury Insurance Fraud

Bodily insurance coverage is typically required in most states and cities as part of the minimum car insurance required by all drivers. Bodily injury insurance covers injuries sustained by the other party in an accident that was your fault. 

Criminals see bodily injury claims as a way to make money through fraud. Fraud occurs when there are false claims of injuries, such as whiplash or back pain. 

These types of false bodily injury claims can affect you by driving up the rates of your insurance. If your insurance company has to pay millions of dollars because of a bogus bodily injury that you supposedly caused, that will ultimately affect your car insurance rates. 

How To Avoid Being a Victim of Car Insurance Fraud

Those committing car insurance fraud rarely pick you out as a potential victim on purpose. They usually have a larger monetary goal in mind, but you might be their ticket to achieve that goal. Unfortunately, though their goal may not be to hurt you intentionally, you may still end up becoming victimized by their criminal schemes. 

Writing down any information that you can is an important step, including car make, car model, driver’s information, and license plate number. If you note any strange behavior, make sure to make a note of it. Never argue with the other driver. Instead call the police and notify your insurance company about any behavior that was out of the ordinary.

Contact an Attorney

If you think you have been a victim of car insurance fraud, the best choice to make is to contact a qualified attorney right away. Car accident lawyers can help protect you from lawsuits arising out of fraudulent car insurance claims. 


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