Increased Insurance Rates due to Insurance Fraud

02 Nov

Like most scams, insurance scams are designed to separate you and your money. Even if you have never been the victim of insurance fraud, you are probably paying for it via a higher premium. According to the Federal Bureau of Investigation, the average U.S. family pays between $400 and $700 per year in increased insurance premiums due to insurance fraud.

We thought it might be a good idea to take a look at some of the more common insurance scams out there, so you aren’t taken advantage of the next time you have to make a claim.

The Less than honest contractor

These guys tend to show up in communities after a major storm such as tornadoes, thunderstorms or hurricanes. They pass themselves off as a legitimate contractor and run roofing and repair scams on desperate homeowners. 

Typically, they will head into damaged neighborhoods and knock on doors claiming to be a roofing or general contractor who can help you repair your home after a major storm. They will give you a low-ball bid on the work and in many cases pressure you to sign a contract or even pay for some of the work up front. 

Once they have some of your money, they may just skip town altogether with the money or if they actually do the work it is often extremely shoddy or done with cheap, substandard materials. In some cases, they complete half of the work to trigger another payment and then leave the rest of the job uncompleted. 

How to avoid these shifty contractors: The best way to avoid this type of scam is to work closely with your insurance company. Before signing with any contractor, have your insurance company come out and inspect for damage. Notify your agent you may have a claim and they should send out an adjuster to survey they damage. 

If you have repairs done prior to an adjuster looking at the damage your insurer has grounds to deny the claim, leaving you on the hook for repairs. 

Never let a contractor pressure you into a signing a contract, always get more than one estimate. Ask friends and family for recommendations or check with your insurer for a list of trusted contractors. Only work with licensed and insured contractors, always ask to see their insurance certificate before work is started. Also check with the BBB to see if they have any complaints, and call references to make sure they are satisfied with the work. 

Once you have found a reputable contractor, sign a contract before work begins which specifies the work scope, price, schedules and warranties of the work. Never pay with cash, use a check or credit card. 

If you suspect the contractor is less than honest or is trying to pull a scam, contact the NICB or the insurance fraud bureau in your state.

Car insurance scams

We are going to look at a couple of car insurance scams:

The Jump In

This usually happens after an auto accident when someone who was not actually in the other car at the time of the accident tries to file a claim against your auto insurance. 

In most cases, after a minor accident you will exchange insurance information with the other driver without calling the police or gathering witness information. Your insurer then notifies you that a passenger is now claiming injuries and looking for a payout from your insurance company, but you do not remember a passenger being in the car at the time of the accident.

If there is not a police report or witnesses, it now becomes a case of he said she said, making it difficult to prove they were not there, in many cases, your insurer will end up paying the fraudulent claim.

Avoiding the jump in: Regardless of how minor the accident is, always call the police and try to get an accident report. Also take photos, video and notes of what happened, document the damage as well as all of the people in the car if there are actual passengers. Collect their names and contact information. 

Get contact information from any witnesses as well. If any of the details from the claim seem wrong to you, contact your insurance company and let them know, they will often do a detailed investigation if you feel there is a scam being committed. 

Shifty tow trucks

The second car insurance scam we are looking at is shifty tow truck drivers who overcharge stranded drivers. This may involve a small accident (major accidents usually involve the police) or even incidents such as a flat tire, breakdown or even a dead battery. 

Tow truck drivers often cruise roads looking for breakdowns or other incidents and swoop in to scam the stranded driver. They stop to help but then ask you to sign a blank document that authorizes the tow. Eventually, seriously inflated charges or charges for services that were not necessary or even performed show up on the bill. 

Avoiding shifty tows: The best way to avoid this is to not deal with a tow truck driver that just shows up out of the blue. Contact a tow company on your own or if the police are at the scene ask them for help or recommendations. 

Before you allow any tow truck driver to hook up your vehicle make sure you have agreed upon a price for the tow, any other charges and storage charges. Get it in writing. If the charges seem excessive, call another tow operator to check pricing. 

The best way to avoid this scam is to add roadside assistance to your insurance policy or join an auto club such as AAA. These companies use reputable tow companies so you can rest assured that you will not be overcharged. 

The bottom line

These are just a few of the dozens of insurance scams that crop up every year. The best advice is to be alert, call your insurer or the police if something feels wrong or the charges seem excessive and be willing to say no if you are uncomfortable with a contractor or other person looking to fix your home or car. 

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