Purchasing car insurance so your automobile is protected against theft or damage is a wise financial decision. No one ever anticipates getting into an accident or having their car stolen, and if these unfortunate events happen to you, it can be very helpful to have an insurance policy in place.
According to the National Insurance Crime Bureau (NICB), insurance fraud is the second most expensive type of white-collar crime in the U.S. and costs billions of dollars every year. Some people may find the car insurance policies complicated and intimidating, and criminals are counting on this so they can profit from a policyholder's ignorance. Whether by stretching the truth or providing false information, con artists can trick both automobile owners and insurance companies out of significant amounts of money.
However, there are several organizations that are devoted to reporting and preventing insurance fraud. As an insurance policyholder, it is important that you educate yourself about insurance scams to make it difficult for scammers to make you a target.
It is important to know that car insurance fraud can occur at any point from the time you buy your car until you sell the vehicle. Here are some scams you should be aware of.
Soft Insurance Fraud
This type of insurance entails one of two things. To commit soft fraud, a person will purposely exaggerate the damage in an auto claim that is otherwise legitimate. For example, if a policyholder already had a dent on their car before an accident but claims the dent as part of the damage of the accident, they are doing this to increase their settlement payout amount.
Soft insurance fraud also entails providing false information to increase the chances that an insurance application will be accepted or to secure a lower premium. For instance, if a family doesn't include the fact that there is a high-risk driver in the household such as a teen or elderly driver, this could be considered soft insurance fraud.
Hard Insurance Fraud
It is much easier to discover hard insurance fraud. People who commit hard insurance fraud will fake a car accident, arson, theft, or injury to get the insurance company to pay. For instance, someone may hit their brakes suddenly on purpose so they can file a rear-end collision lawsuit against you and receive the insurance settlement.
It may seem like hard or soft insurance fraud aren't major crimes, but fraud against insurance companies can raise the premiums for current insurance customers.
Car Insurance Schemes You Should Look Out For
Soft or hard insurance fraud can be difficult to determine whether you're driving on the road or talking to an insurance agent. That's why you need to know the types of insurance fraud to be aware of. These include:
Once you purchase your first car, you are a target for fraud. If an insurance representative is dishonest, they may steal your money by not setting up the insurance plan that was promised to you. This means if you get into a wreck, you'll have to pay for the damages out of your own pocket. Some agents may also add extra coverage to your policy that you didn't authorize so they can get a higher commission from the extra money.
Confusion and fear
Con artists will use these tactics to get you to make a rushed decision. They will discourage you from shopping around for insurance policies until you find the right deal for you. Keep in mind that these scammers may not only be conning you to get your money. They may also be looking for a birthdate or Social Security number so they can commit credit card fraud or identity theft later.
What Makes You a Target for Auto Insurance Scams?
Individuals who are purchasing a car for the first time, especially high school or college students, are more likely to be victims of auto insurance scams. Unethical insurance agents will also prey on the elderly, disabled individuals, and women, or anyone else they feel won't fight back.
To avoid auto insurance scams, you should vet all insurance agents. Don't ever let an agent make you feel like you have to agree to an insurance policy right away. Always confirm your insurance coverage through your carrier and collect several quotes so you can choose the one that best fits your budget and needs.