Car Insurance Scams

Car insurance scams cause the average driver to pay $550 more for car insurance per year. Car insurance studies estimate up to 25% of injury claims from car accidents are scams.

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A former insurance producer, Laura understands that education is key when it comes to buying insurance. She has happily dedicated many hours to helping her clients understand how the insurance marketplace works so they can find the best car, home, and life insurance products for their needs.

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Joel Ohman is the CEO of a private equity backed digital media company. He is a CERTIFIED FINANCIAL PLANNER™, author, angel investor, and serial entrepreneur who loves creating new things, whether books or businesses. He has also previously served as the founder and resident CFP® of a national insurance agency, Real Time Health Quotes. He has an MBA from the University of South Florida. Jo...

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Reviewed by Joel Ohman
Founder & CFP®

UPDATED: Jan 27, 2021

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Here's what you need to know...

  • Car insurance scams raise premiums as insurance companies need to recover their losses after paying for a claim
  • Some people plan scams and involve their own insurance companies
  • Others focus their efforts on creating scenarios that make it seem as though another driver was at fault

Car insurance scams are sometimes considered victimless crimes, but there are always victims involved in any insurance scam.

Unfortunately, every car insurance scam has thousands of victims, including you. This is the reason your car insurance is as high as it is.

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They way car insurance scams affect all drivers is the same way other “victimless crimes” like retail theft affect all of the other shoppers.

Due to stolen inventory, retail stores raise their prices in order to compensate for the loss. The lost cost of car insurance scams is reflected in your high premiums.

Some people try to scam their own insurance company and other people try to scam you directly.

In either instance, the car insurance company is definitely a victim and the cost they have to pay will be passed on to you, making you a victim too.

If you are the victim of a car insurance scam, you have even more pain and suffering as you battle car insurance companies and try to fight for what you know is right.

If you lose the battle, your car insurance premiums will most likely increase even though you are not responsible for causing any accident.

Car Insurance Scams Against Your Own Car Insurance Company

One way some people try to lower their car insurance premium is to lie to their car insurance company.

The problem with this, besides being illegal, is that it can really backfire on you.

If you lie on your insurance application and then need to submit a claim, your lie will most likely be revealed and your claim will be denied.

For example, if your spouse or domestic partner has a lot of insurance claims in her history, you may decide to leave her off of your policy in order to keep your premiums lower.

However, you and your partner share the car and she is really the primary driver on it.

If she has an accident, during the investigation the insurance company will find out that she uses the car on a daily basis but is not listed as an insured on the policy.

The car insurance company can deny your claim, leaving you financially responsible for all bodily injuries and property damages resulting from the accident.

Some extreme car insurance scams include paying someone to set your car on fire or steal it so that you can file an insurance claim. The police usually uncover the truth behind these car insurance scams quite quickly, usually before an insurance claim reaches the point of payout.

If you are found guilty of insurance fraud you can worry about your car insurance premiums from behind jail bars.

Other lies on your insurance application or to the car insurance company can be considered fraud, which is punishable by law.

If you try to pull a car insurance scam on your own car insurance company, there is a good chance you will get caught and it will cost you much more than you ever could have saved.

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Car Insurance Scams Making You the Victim

Unfortunately, some people still think that a quick way to earn extra money is by victimizing other people. Car insurance scams seem relatively easy to pull off and so these types of incidents occur all the time.

These types of car insurance scams directly victimize you because the suspect stages car accidents to make you appear to be the responsible party. One example is a car that backs up into you at a red light while you are distracted by something else.

Usually, these types of car insurance scams are most effective when two or more parties work together against you.

Another type of car insurance scam is when a car forces you out of your lane and into another vehicle and then takes off.

The person you hit, who is involved in the car insurance scam, holds your car insurance company legally responsible and you have no one to hold responsible for your damages.

Usually, it is not just property damage that is involved in a car insurance scam.

The supposed victims also end up with false medical injuries such as whiplash. Rather than go through the cost of a lawsuit, the car insurance company pays out the benefits, raises your premiums, and may even terminate your policy afterward.

Help for Victims of Car Insurance Scams

If you are the victim of a car insurance scam, it is imperative that you inform the police and your car insurance company of all of the details immediately.

Do everything you can to remember the car that was involved, a description of the driver, and anything else that may be relevant.

The only way to stop car insurance scams from happening is by taking a proactive approach.

Don’t try to cheat your own insurance company and don’t let someone else scam you. Be vigilant and report any suspected fraud as soon as it happens. When car insurance scams occur, everyone becomes a victim with high priced premiums.

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