Car insurance fraud: What you need to know

You know that insurance fraud can be a serious issue, but did you know that even certain omissions on your application can be considered car insurance fraud?

Anna SwartzKara McGinley


Anna Swartz

Anna Swartz

Managing Editor & Auto Insurance Expert

Anna Swartz is a managing editor and auto insurance expert at Policygenius, where she oversees our car insurance coverage. Previously, she was a senior staff writer at, as well as an associate writer at The Dodo.

 & Kara McGinley

Kara McGinley

Editor & Licensed Home Insurance Expert

Kara McGinley is an editor and licensed home insurance expert at Policygenius, where she writes about homeowners and renters insurance. As a journalist and as an insurance expert, her work and insights have been featured in Kiplinger, Lifehacker, MSN,, and elsewhere.

Updated  | 6 min read

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When you buy a car insurance policy, you’re essentially signing a contract with the car insurance company. They agree to cover the costs after a car accident — either of the damage you caused to others or to your own car — and you agree to pay your premium on time and in full to keep your policy active and make sure you’re protected.

But if you, another driver, a vendor or even an unscrupulous insurance agent deceives the insurance company (by omitting information or submitting a false claim) in order to pay less or receive a payout, that’s insurance fraud.

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And insurance fraud is a serious issue with potentially serious consequences — certain omissions or falsehoods from a policyholder could lead to loss of coverage, and more serious types of insurance fraud can even result in jail time. Here’s what you need to know about the business of car insurance fraud.

Key Takeaways

  • Car insurance fraud can take many forms, from omissions on an application to filing false or exaggerated claims

  • Insurance fraud can be perpetrated by policyholders, other drivers, and even unscrupulous mechanics

  • The consequences for car insurance fraud vary, from denied claims and dropped policies to fines and even jail time

What is car insurance fraud?

According to the National Insurance Crime Bureau, an estimated 10% (or more) of property and casualty insurance claims may be fraud, and those fraudulent claims lead to higher premiums across the industry. Car insurance fraud comes in many different stripes. Within the industry, insurance fraud is usually divided into two main categories: hard insurance fraud and soft insurance fraud.

  • Hard fraud - When you make up an incident altogether, like selling your car and then claiming it was stolen. 

  • Soft fraud - Typically instances like falsifying or exaggerating elements of a real claim, such as saying an old scratch on your car happened during a recent accident. Soft fraud can also refer to omissions or misrepresentations on a car insurance application.

Six types of car insurance fraud

There are many different ways someone could commit insurance fraud. Below are a few common types of car insurance fraud and scams. 

1. Falsely reporting a stolen vehicle

When your car is stolen, your insurance company will consider it a total loss and it will be covered by your comprehensive coverage. The insurance company will pay out the actual cash value (ACV) of your car and you can use the payout to buy a new one. But if a policyholder intentionally abandons, destroys or sells their vehicle and then claims it’s stolen, that’s a serious form of insurance fraud.

2. Exaggerating claims

If you’re in a car accident with another vehicle and are determined to be the at-fault driver, your liability coverage steps in to cover the other driver’s repair bills and medical bills.

But if that driver were to exaggerate their claims, maybe by attributing older damage to their accident with you in order to receive more money from your insurance company, that would be a form of fraud.

Untrustworthy repair shops can also be guilty of exaggerating claims. If you take your car to a shop after an accident and they bill your insurance company for extra, unnecessary repairs, or charge you more than the repairs were worth, that’s also a form of fraud.

3. Staged accidents

There are a few ways to stage an accident. A driver may purposefully slam on their brakes so the car behind them rear-ends them, or intentionally wave-on a driver coming out of a parking lot and then crash into them as they pull out into the lane. Staged accidents are a serious type of fraud, and if you think you’re a victim of one you should document the damage and let your insurance company know right away. 

4. The “windshield replacement scam”

Similar to a vehicle repair shop that exaggerates your damages in order to upcharge your insurance company, you may come across a fraud scheme where someone approaches you — often at a gas station or parking lot, or knocks on your door and says your vehicle needs a new windshield.

They may tell you that your windshield is damaged even if it doesn’t appear to be, and then offer to replace your windshield and bill your insurance company. If you agree, they may replace your windshield with a shoddier one and bill your insurance multiple times. That could lead to higher premiums for you.

5. Towing scams

In the same vein as windshield replacement scams, be wary of towing scams. If your car breaks down on the side of a road, or if you get into a car accident, make sure you don’t let a tow truck take your car unless you’re the one who called them. Tow truck scammers have been known to drive around looking for desperate drivers with broken-down cars to offer a helping hand. If you allow them to take your car, you may be stuck paying a significant amount of money to get your vehicle back from them. 

It’s important to only call accredited tow truck companies, or request a tow through your insurer if you have roadside assistance coverage.  

6. Misrepresenting or omitting information on a car insurance application

When you purchase car insurance, you submit personal information including your ZIP code, driving history and insured history. If you omit certain details, like leaving off a recent accident or DUI, your insurance company will probably figure it out when they look up your driving record.

But if you lie about something that isn’t immediately discoverable, like if you say your car is garaged somewhere else in order to get cheaper rates, this is a form of insurance fraud, and your insurance company may figure it out when you make a claim.

It’s also important to list every driver in your household on your policy. If you leave your teenage child off of your policy and they proceed to get in an accident in your car, it may not be covered by your insurance. Even if the omission was accidental, the claim could be denied.

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What happens if you make a false car insurance claim?

Insurance companies have strong systems in place to identify and detect fraud. When you file a claim with your car insurance company, they’ll request a lot of information about the incident, including a police report, photos, diagrams, and any repair bills or medical bills.

When you file a claim, you’ll be assigned a claims adjuster, also called a claims representative, who will investigate your claim and help decide how much your payout will be. The adjuster’s investigation may include in-person visits to the body shop where your car is being fixed — all of this helps the insurance company ensure your claim is legit.

Larger insurance companies also use technology to help them identify fraud or suspicious patterns. If your claim is flagged by fraud detecting software, it may be sent over to your insurer’s special investigations unit, a department that investigates the legitimacy of insurance claims. This can involve an even more in-depth investigation of your claim.

If your auto insurance company determines your claim was fraudulent, the consequences will vary depending on the severity of the fraud. 

Can you go to jail for insurance fraud?

Yes, insurance fraud can result in jail time, but only in cases where your insurer decides to turn the suspected fraud over to law enforcement.

In some scenarios, like if your car insurance company discovers you omitted information on your application while reviewing a claim, the claim may be denied, but you likely wouldn’t be arrested for it. Your premiums may also be raised and you’ll have to pay the increased amount retroactively to your insurer. 

If your insurance company suspects a fraudulent claim, they may actually cancel your policy altogether. And in serious cases, they will turn you over to law enforcement and you may face misdemeanor or felony fraud charges. This is where the consequences become even more serious — someone convicted of fraud may have to pay thousands of dollars in fines or even be sentenced to jail.

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Frequently asked questions

How do I avoid car insurance fraud?

Avoid any suspicion of insurance fraud by being as honest as possible in your insurance application and when filing claims. If you suspect you may be the victim of an insurance scam or fraud, contact your car insurance company or your state’s Department of Insurance.

What should I not tell an insurance adjuster?

As mentioned, omitting information or straight-up lying when you file a car insurance claim is considered fraud. You should be honest with your insurance adjuster, and provide any requested documents, like photos, police reports, and contact information for the other driver. If you’re speaking to an insurance adjuster from the other driver’s insurance company, keep your answers straightforward and factual. Let your insurance company know before you speak to the other company’s adjuster.

Should you contact your insurance company if you are not at fault?

Yes, it’s a good idea to contact your insurance company if you get into a car accident even if it was the other driver’s fault. Be sure to document all the damage and get the other driver’s insurance information, just as you would if you were the at-fault party. You can file a third-party claim with the other driver’s insurer, or your insurance company may work directly with the driver’s provider to come to a settlement.