3 Insurance Fraud Offenses You Might Think Are No Big Deal

No one likes to pay insurance premiums, but a good insurance policy protects you against significant losses. For example, health insurance prevents you from having to pay thousands of dollars out of your own pocket for surgery or emergency medical care.

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Although insurance is helpful, it also comes with a lot of rules and restrictions. Before you file a claim, learn more about some of the actions that constitute insurance fraud.

What Is Insurance Fraud?

Insurance fraud is when you lie to an insurance company to obtain some type of advantage. For example, if you submit a false claim to your health insurance company, you're trying to get reimbursed for expenses you never incurred. This gives you a financial advantage that you're not entitled to receive under the terms of your policy.

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What Are Some ‘Minor’ Insurance Fraud Offenses?

Insurance fraud is a broad term that applies to many situations. Although widespread fraud schemes get the most attention, it's possible to commit insurance fraud without even realizing it, especially if you take advice from someone with no experience in the insurance industry. These actions seem minor, but they can actually land you in hot water with the authorities.

1. Filing Multiple Claims for One Incident

If you have a covered loss, you need to file a claim with your insurance company. Once the claim is approved, you'll receive the funds you need to repair or replace your damaged property. For example, if your home is damaged in a natural disaster, your insurance company may give you funds for a new roof and new siding.

Some people file multiple claims in an attempt to maximize the amount of money they receive. This seems harmless, but it's an example of insurance fraud. If you experience a covered loss, make sure you don't file multiple claims.

2. Making False Reports Related to Stolen Property

Another example of insurance fraud is filing false claims related to stolen property. For example, if you report a valuable necklace as stolen when it's sitting in your jewelry box, you may be able to convince your insurance company to reimburse you for it. Another example of this type of fraud involves abandoning an automobile and reporting it as stolen. In both cases, you're misrepresenting the truth to your insurance company.

3. Providing False Information to Your Insurer

When you sign up for coverage, your insurance company asks for your physical address, telephone number and other personal information. It may seem like no big deal to put down someone else's address, but doing so is a type of insurance fraud.

For example, if you provide your sibling's address instead of your own, your insurance company won't be able to make an accurate assessment of your risk profile. Insurers base their premiums on where you live, so giving a false address also prevents your insurance company from charging you the correct price.

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Potential Penalties for Insurance Fraud

Although these actions seem harmless, insurance fraud is a crime. It doesn't matter if the fraud results in a gain of $5 or $5,000. If you're convicted of insurance fraud, you may be sentenced to fines, restitution, jail time, probation or other penalties. A criminal conviction can also damage your reputation and make it difficult to find employment.

How to Avoid Fraud When Filing an Insurance Claim

There's nothing wrong with filing an insurance claim when you experience a legitimate loss. The key is to be honest and follow your insurance company's rules. Here are a few tips that can help you avoid committing insurance fraud by mistake:

• File just one claim for each incident. If you forget to include something, contact your insurance agent. You may be able to amend your original claim rather than submitting a new claim.
• Keep good records. When you file a claim, your insurance company may ask you to provide the value of each damaged or stolen item. You can't just make up prices and hope your insurer will agree. Instead, you need to provide documentation. If you keep receipts, sales contracts and other records, you'll find it easy to provide the requested information.
• Contact your insurance agent if you're not sure about something. Asking for advice before you submit a claim can help you avoid unintentional errors.