Understanding Insurance Fraud And How To Avoid It

Having the right type of adequate insurance policies is critical in protecting you from significant financial loss and giving you the peace of mind that you safeguarded in the event of an unexpected accident. From auto, homeowners, life, pet, or business insurance, having insurance coverage to meet your needs will provide a safety net to protect you and your assets. Unfortunately, as with any industry, insurance fraud can be an issue that causes everybody’s insurance costs to go up. If you are located in San Diego, California, and have questions about your insurance policies and premium rates, Windfall Insurance Services Inc. can help. Continue reading to learn more about insurance fraud and how to avoid it.

What Is Insurance Fraud?

Insurance fraud is when someone intentionally misrepresents or lies about a situation in order to receive an insurance benefit that normally would not be entitled to or when someone intentionally denies a benefit that another person is rightfully entitled to. Insurance fraud is against the law and is an offense that someone can be prosecuted for, and in some cases, some policyholders or insurance applicants may not even be aware that they are doing it. Insurance fraud can be committed by people applying for insurance, insurance policyholders, and a third-party making a claim for financial gain by misrepresenting facts to lower their premiums or receive a claim benefit that is not legally theirs. Because the cost of insurance claims are divided among an agency’s policyholders, fraudulent claims increase insurance premiums for everyone.

What Are Some Common Types Of Insurance Fraud?

There are many different types of insurance fraud, including pre-meditated and unplanned. An example of planned or pre-meditated insurance fraud would be committing arson to destroy a home or a business to cash out on a homeowners or business insurance benefit. An instance of unplanned insurance fraud would be when an accident does occur and the policyholder files a legitimate claim, but they overexaggerate the damages in order to receive a bigger insurance payout, which is more difficult to prove. An example of this would be if someone is in a car accident, they may magnify the extent of their injuries to collect more compensation. Other types of insurance fraud include misrepresentation on an insurance application, filing a false claim, or identity theft by forging changes to another person’s policy. When filling out an insurance policy, there are questions about the amount of risk a policyholder takes on, and when an applicant is not truthful about their behavior on the application, this can be deemed as insurance fraud. For example, if someone applying for life insurance is answering questions about their health and knowingly omitting certain information, like smoking or heavy drinking, that is considered material misrepresentation.

If you are located in San Diego, California, and have questions about your insurance policies and preventing insurance fraud, contact Windfall Insurance Services Inc. for a consultation.