When we hear the term “fraud,” our minds typically conjure images of high-stakes white-collar crimes with severe repercussions. It’s unlikely that we associate fraud with our neighbor telling a small lie about their phone breaking or our brother failing to disclose a previous insurance cancellation to their insurer. Yet, these actions indeed constitute fraud, and engaging in such behaviors can lead to severe consequences.
Here are some of the surprisingly common instances of insurance fraud that you may not be aware of, each with potentially serious ramifications:
Misrepresenting your insurance history
So you’ve secured a new insurer but you ‘casually’ happen to omit that your previous insurer had cancelled your policy. Or worse still, you leave out the exact number of previous claims you had with your last insurer.
Distorting information about the insured item
Not being honest and specific about the exact level of home security you have in place such as security gates, functional alarms or bars on the window is one way of distorting information. Another example could be listing yourself as the regular driver of the family vehicle in the hopes of securing a lower premium when in actuality its your teenage child.
Neglecting preventive measures against loss or damage
Failing to take appropriate care of personal items like leaving valuables unsecured then claiming them stolen or damaged might seem like a harmless omission of the truth behind the claim but it constitutes fraud regardless.
Fabricating details about the claim’s circumstances
We’ve all heard about the classic ‘tell them you were driving’ lie when an accident happens and the actual driver either wasn’t covered by the policy or not legally permitted to drive at the time of the accident. This forms an outright fabrication of the truth behind the circumstances and it’s a sure-fire way to have your claim rejected on the basis of blatant fraud.
Insuring items already damaged
Thinking of insuring a phone that already has a damaged screen or a car that’s already been dented? Definitely fraud.
These and other instances like Inflating the value of your loss, manipulating quotes or invoices to prove ownership, and even use illicit funds to pay insurance premiums are some of the things that constitute insurance fraud.
And the reason why its important to not only be aware of these things but also avoid them all together is because the consequences of engaging in insurance fraud could result in some serious reprecussions.
Firstly, it can directly impact you:
- Your claim may be rejected, leaving you responsible for covering the loss out of your own pocket.
- The insurer can cancel your policy retroactively, effectively voiding it from the beginning.
- If your lies resulted in a lower premium, the insurer will reduce your payout by the amount you underpaid since the policy’s inception.
- You may be added to the insurance fraud database, making it challenging to obtain coverage in the future.
- The insurer may report you to the police or FICA, potentially resulting in legal action or lawsuits.
While these actions may not be driven by ill intentions, the consequences are far from pleasant and can be significant. It is always advisable to seek clarification from your insurer if you are uncertain about any aspects of your coverage or procedural details.
If you’re looking for comprehensive insurance quotes supported by expert guidance and risk advisory, Fachs Financial Services has a team of skilled brokers to help you find the right coverage for your unique needs.
*Please note the following blog post is for information purposes only and does not constitute financial or legal advice.