What’s the price of insurance fraud?
Insurance fraud is a serious crime, and believe it or not, the victim is you, and everyone else who has an insurance policy.
The Insurance Journal put out a fact from The Coalition Against Insurance Fraud that estimates there is $80 billion of insurance fraud each year, including life, health, specialty, and property and casualty insurance.
Let that number sink in for a moment. It’s hard to grasp how much even $1 billion is. $80 BILLION.
The reason you are affected by insurance fraud is that insurance companies have no choice but to increase premiums to offset the major losses due to insurance fraud.
Here are a few of the common ways people commit insurance fraud.
1. Faked death. It’s crazy how far criminals will go for money. Believe it or not, a faked death is a form of insurance fraud. The criminal will have a life insurance policy issued for an adequate length of time before they fake their death. The beneficiary (typically the spouse) is paid the death benefit, and suddenly, they go missing too.
2. Staged home fire. Homeowners insurance provides coverage for your home and your personal property inside the home. Typically, the homeowner will leave and hire criminals to set fire to the home. They make sure to have the value of their assets on record to get fully reimbursed for their personal items.
3. Car accident. Two criminals will stage a car accident with the goal of receiving pay out for two totaled vehicles. If you’ve ever been in a car accident, you know just how scary and painful it can be. The lengths people will go to for illegal money is crazy.
4. Stolen car. The insured will sell their car overseas and then report it stolen. That way, they are receiving two payouts on the same car.
5. Storm fraud. When a storm comes, criminals will do whatever they can to enhance the damage with hopes of exceeding the payment they will receive from the insurance company. For example, following a hailstorm, the insured will add more damage using a hammer. The indents from the hammer look completely different than the ones made by the hail.
When someone knowingly makes a false statement to their insurance company with the hopes of getting a payment, it’s a very serious crime. Just like any other crime, there are penalties for committing insurance fraud.
“Soft fraud” is a term that refers to a person exaggerating the damages from a claim. The penalty for soft fraud is fines, jail time (up to one year), community service, and probation.
“Hard fraud” refers to when a person stages a loss with the intention of receiving payment from the insurance company. The penalty for hard fraud could be a number of years in prison.
Honesty is a virtue. Living an honest life is much cheaper for both you and your insurance company.
Do you have questions about your insurance? Find an insurance agent near you with our Agent Finder
Search All Blogs
Search All Blogs
Read More Insurance Blogs
Beyond the Funeral: 9 Reasons Why You Need More Life Insurance Than You Think
Life Insurance: Not Just for Buryin’! Unexpected Costs You Never Knew Were Covered
Life Insurance Myths Busted: Unveiling the Simple Truths Behind Financial Security
Considering life insurance but confused by the myths? We clear the air on common misconceptions and show you how to get simple, affordable coverage.
The Farewell Financial: Planning a Peaceful Goodbye
Beyond Goodbyes: A Guide to Navigating Funeral Costs and Life Insurance
Why Life Insurance Matters for Businesses
Death and the Business Owner: How Life Insurance Can Secure Your Legacy
Beyond the Grave: Burial Insurance vs. Life Insurance Explained
Don’t Be Buried by Confusion: Understanding Burial and Life Insurance
From Bronze Age to Boomers: How Life Expectancy Went From Meh to Magnificent
How Long Will You Live? A Look at Life Expectancy Throughout History (and Why You Might Need Life Insurance)
Beyond “My Beloved Spouse”: A Guide to Choosing Your Life Insurance Beneficiary
The Beneficiary Bunch: Understanding Your Options
Life on the Edge? How Your Hobbies Can Affect Your Life Insurance Rates
Beyond the Premium: Unveiling the Unexpected Links Between Hobbies and Life Insurance
Unveiling the Different Players (and Why We’re Your Guide!)
Insurance Companies: Not All Created Equal! Find Your Perfect Match with Our Help
Cracking the Code: Cash Value, Loan Value, Surrender Value – It’s All in the Life Insurance Policy!
Beyond the Death Benefit: Unlocking the Hidden Gems of Your Life Insurance Policy