Car insurance fraud encompasses various deceptive practices aimed at profiting from insurance companies. Individuals involved in car insurance fraud can include policyholders, other drivers, insurance agents, car repair shops, towing companies, windshield repair companies, and medical providers treating accident victims.

According to the FBI, insurance fraud results in an annual cost of $400 to $700 for the average American family through increased premiums. Recognizing the workings of car insurance fraud can help you avoid becoming a victim of fraudulent schemes.

There are two main types of car insurance fraud: soft fraud and hard fraud. Soft fraud, the more common type, involves policyholders exaggerating legitimate insurance claims to receive larger payouts or providing false information to obtain better insurance rates. On the other hand, hard fraud is deliberate and involves individuals intentionally damaging their vehicles to claim insurance payouts.

Apart from policyholders, other parties such as dishonest car repair shops, staged auto accident participants, unscrupulous bystanders, and fraudulent car insurance companies or agents are also engaged in car insurance fraud activities.

Protecting yourself from car insurance fraud involves taking precautions such as avoiding erratic drivers, promptly documenting accident damage, being cautious of unsolicited assistance, dealing with reputable insurance companies and agents, researching repair shops in advance, and seeking recommendations from trusted sources.

In the unfortunate event that you fall victim to car insurance fraud, it is crucial to report the incident to your insurer, the National Insurance Crime Bureau, your state's insurance fraud bureau, and file a police report to address the situation and prevent further fraudulent activities. Being aware of common fraudulent tactics can help you safeguard your interests and prevent unnecessary increases in insurance premiums.