Common Types of Insurance Fraud

Written by on 4/10/2015 10:00 AM . It has 3 Comments.

While average people are often perfectly honest and would never think to commit fraud against anyone, there are plenty of people who are not. Insurance fraud may seem harmless enough, but when schemers are paid money they’re not due, the result is higher premiums for everyone. Insurance fraud is expensive and illegal. Honest, law-abiding citizens are encouraged to report insurance fraud when you see it. Take a look at these common types of insurance fraud so you know what it looks like.


There are many ways to commit fraud against your automobile insurance. Some ways require help and others don’t.

  • Vehicle Damage: The car owner files a claim for damage to a vehicle. Once they receive payment for the damage, they pocket the money without repairing the damage.
  • Accidents: Sometimes the driver and the victim are the only parties involved and sometimes the investigators and witnesses are a part of the fraud. Either way, the value of both vehicles is inflated and both parties receive more than they should for an accident that was planned – and not an accident at all.
  • Stolen Vehicle: This can happen one of two ways. The owner may sell the vehicle to a body shop who cuts it up for parts or they may sell it and ship it overseas. The end result is that the vehicle is reported stolen and the owner receives a payout.


Homes are a major financial investment and with the right policy, can payout big time for damage or destruction. Some of the most common insurance fraud happens at home.


Fraudulent fires can happen in a few ways:

  • Staged home fire with valuables in the home and the insurance company has been given the value of each.
  • Staged home fire with valuables removed so no damage incurs.
  • Abandoned home fires with nothing inside.

Regardless of the type, the owners of the home aren’t there and can account for their actions and whereabouts – giving them an alibi.


Owners might take existing storm damage and make it worse in order to have a larger claim. Worse, they may have no damage at all and take advantage of the chaos after a big storm to make a claim that doesn’t exist.


Workers comp fraud may be the most well-known type of fraud. It comes in a variety of forms.

  • Employees may fake an injury or report an injury at work that occurred in their off-time.
  • Employees might have a real injury that happened on-the-job but they let the injury linger – or appear to linger – in order to obtain additional benefits.

Employees are not the only perpetrators of workers comp fraud. Employers may take out ghost policies for their employees to save money, even though their company doesn’t truly qualify for a ghost policy. Worst of all, ghost policies don’t offer true coverage for employees, leaving everyone unprotected in the event of an accident or injury while at work.

Those who commit insurance fraud are no different than thieves. Instead of stealing goods and valuables, they’re stealing money – your money because insurance companies pass on the costs of paying out fraudulent claims in the form of higher premiums. Be on the lookout for fraud and report it when you see it.


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