Insurance

Ask an agent: What NOT to do with your insurance

Avoiding insurance fraud

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Unsurpisingly, a lot of the questions we get asked amount to: can I do this thing? And often, when you have to ask, the answer is no. Often the someone is asking about would actually amount to insurance fraud, or a deliberate deception against an insurance company for financial gain. 

Welcome back to Ask an Agent, our advice column where we share questions we’ve gotten and the answers from The Zebra licensed insurance agents. Today, we're covering insurance fraud and some questioners who wisely double-checked before moving forward.

Question 1: Is it fraud to list an ex-spouse on your car insurance?

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My friend and her ex split up last year and live in different houses in different states. Now he's trying to use her to pay less for his car insurance. Can my friend have a policy in the state she lives in and be a driver listed on her ex-husband’s auto insurance policy in another state? He is trying to get a lower rate. I told her this would be considered fraud. What should she do?

-"Asking for a friend" in Arizona

You are absolutely correct. That would be fraud. If they are legally divorced, then he cannot list her on the policy if she does not drive his cars. If they are not legally divorced, then he will need to list her on the policy but exclude her from the policy if she is not driving the vehicles. Being excluded means she is not covered to drive under the policy. 

If she suspects he is using her name fraudlently without her consent, she should report it directly to the insurance company. Some insurance companies have a place to report fraud directly on their websites. If his doesn't, she will need to contact its headquarters to be connected to the fraud department. If she is unsure of what company he is using, she may need to report it to her states' agency. I'm unclear if she lives in Arizona where you do, but if so, she can access resources here. For other states, she just needs to search her state and "reporting insurance fraud" for help. 

Question 2: Can I report a pre-existing claim as new?

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A few weeks back, I had some damage to my vehicle. It wasn't my fault; all of the damages were weather related. It was a totally genuine claim, but unfortunately I had terrible insurance, so it wasn't covered. Since then, I've switched to the new carrier. Now I've reported it, only I claimed the accident just happened a few days ago, not a few weeks ago. It all seems like it will be covered with zero deductible. No penalty against my premium even. Should I be skeptical that it's all a little too easy? Furthermore, it is set to be repaired by the very same shop I initially got a quote from to repair the damage out of pocket. The day I took it into this shop was the exact same day my coverage began with the new carrier.  Am I likely to face a criminal charge for failing to report a pre-existing condition to my new carrier and then claiming it as new?

-Iffy in Illinois

This is considered insurance fraud. You do not want to file the claim. Since your current insurance company was not in place at the time for the damages, they are not responsible for the damages.

Insurance fraud in Illinois is punished based on the value you obtained from the insurance company. If it's less than $300 or less, it is a class A misdemeanor, punishable by up to one year in jail and a fine of $2,500. The amounts only go up incremently from there with that max (for over $100,000) being a Class 1 felony, punished by a minimum of four years in prison and a maximum of 15 and fines of up to $25,000.

Contact your insurance carrier right away. I'm not exactly sure what will happen next. It can vary by your company.

Question 3: What happens if you insure a personal vehicle and use it for commercial use?

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If someone gets insurance on a company vehicle but lies and says it's for personal use, is that fraud? I know a company that has three vehicles for their business but tells the insurance company that they're only for personal use to pay less.

-Trickery in Texas

 

Yet again, if you think it's fraud, you're probably right. Especially if it involves lying to pay less. An insurance company needs to know what kind of risk it is being exposed to in order to accurately price the policy. By lying about the type of policy it is, this company is risking having any potential claims denied. They are also opening themselves up to potential legal issues. To sum up the theme of this week's whole column: It is never a good idea to lie to an insurance company.

 

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Susan MeyerSenior Editorial Manager

Susan is a licensed insurance agent and has worked as a writer and editor for over 10 years across a number of industries. She has worked at The Zebra a year. She currently specializes in producing research-focused content for The Zebra's Resource Center on topics related to auto and home insurance, personal finance and smarter living in the 21st century.

Susan's work has been cited by the Insurance Information Institute, State Farm, BuzzfeedCBS, Yahoo, Entrepreneur and Business Insider.