Insurance Fraud and Penalties for Falsifying Documents

Man and woman inspecting car after an accident hoping each person has insurance coverage.
••• Guido Mieth / Getty Images

Insurance fraud is a huge problem which often goes without notice or care. Lots of people feel insurance fraud is a victimless crime where nobody gets hurt. However, it is not just wealthy insurance companies getting hurt, it is all drivers which follow the rules and abide by the laws who are getting penalized with higher and higher insurance rates. Insurance fraud can come in many different forms. Some deceive insurance carriers into lower insurance rates while others file fraudulent claims.

Pay Your Fair Share

Nobody wants to pay for car insurance because it is uncertain if it will ever be used. When money is tight, insurance might seem to be one of those things you can do without, but understanding what car insurance is for will help minimize the overwhelming feeling of being ripped off. Still, people think if they lie or don’t tell the entire truth, they can get insurance coverage cheaper and all is well.

Common Lies

  • Intentionally not listing drivers
  • Wrong garaging address
  • Vehicle usage (miles that are driven or used for business)

Lying or forgetting can cost you in the long run. It is possible for your car insurance carrier to deny coverage for a claim and cancel your policy if you have misrepresented yourself. Therefore, you would have been paying for a policy which will do you no good at all at the time of a claim. It is definitely better to be straightforward and upfront with your insurer. Coverage is still possible. Some carriers will make certain your policy is rated properly from here on out. It is certainly not recommended to take the risk, it is a major gamble.

Falsifying Documents

Forging insurance documentation can bring about stiff penalties. People who do want or cannot afford insurance might be tempted to create their own proof of car insurance to provide to law enforcement or the Secretary of State. Computers make it fairly easy to accomplish, however, it is easy to get caught.

Lots of states use pin numbers to verify car insurance. Or, a simple call to the insurance carrier provided will tell if the policy is valid or not. Each state has its own set of penalties for fake insurance documents. Most penalties include a large fine and possible imprisonment.

Criminal Rings

An insurance criminal ring includes an organized group of people in on insurance scams and files multiple fraudulent claims earning themselves huge paydays. Insurance criminal rings often include unethical doctors and body shops. The biggest being false medical claims filed for non-existent injuries. No-fault states get the brunt of fraudulent medical claims because claims are paid without going through the courts.

Insurance Fraud Affects All Drivers

Everyone always wonders why car insurance is so expensive. Insurance fraud accounts for a large part of everyone's overall expense. Yes, it is definitely frustrating we all have to pay for corrupt people's actions. Insurance carriers can only take so many preventative measures. As long as you want your claims to be paid, it is the insurance carrier's responsibility to make sure they have enough money to cover you. Raising premiums is often the only way to ensure they will have enough money on hand to cover life's unpredictability.