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How Fraud Affects Your Ability to Get Cheap Car Insurance

You have a clean driving record, your credit is sterling and you have a vehicle that is outfitted with plenty of safety and security devices—so why are your car insurance rates so high? Chances are, you live in an area where car insurance fraud is rampant, or your insurance company has a high number of questionable claims. It's unfair, but people who take advantage of insurance companies make it difficult for the rest of us to get cheap car insurance. Here are a few ways unscrupulous policy holders defraud insurance companies:

Registering a car in another state or neighborhood. It may seem harmless enough, but it's fraud nonetheless, and its known as auto insurance rate evasion. Different states have varying insurance rates because of different levels of traffic congestion, lower or higher crime rates or lower or higher incidences of natural disasters. Vehicle owners who register their vehicles using the address of a friend or relative in a neighboring state are costing you money. Insurance companies that lose money due to rate evasion charge truthful policy holders the difference.

Exaggerating an injury. This is what is known as "soft fraud." Victims of auto collisions who are injured but falsely claim more severe injuries than what they actually suffered are committing fraud; albeit more difficult to prove than blatant misrepresentation. There are certain injuries (back and neck pain, specifically) whose severities are very difficult to verify, and claimants exaggerate the levels of pain and suffering in order to inflate their disability compensation.

Deliberately staging a collision. This is a very serious offense, and therefore less frequent than forms of soft fraud. This type of hard fraud involves either initiating an accident or theft in order to submit a false insurance claim. One common type of accident initiation is when a driver waves another car who is trying to pass and then accelerating rather than slowing; the claimant then tells the police that he or she never waved.

Auto repair facilities falsifying the extent of vehicle damage. A surprising number of dishonest repair centers claim that accidents caused more vehicle damage than what was legitimately found in order to inflate the repair costs. This can occur either with or without the knowledge of the vehicle owner.

Not only does fraud result in higher rates for consumers due to false payouts, insurance companies must use additional resources in order to spot suspicious activity, and this cost is passed on to the customer. Insurers use additional administrative staff, private investigators and high-tech computer software so that dubious billing can be spotted.

Not only can insurance fraud hurt everyone's ability to get cheap car insurance, getting into a collision with someone intending to commit fraud can cost you a lot more than money. Always be careful when behind the wheel, and if you are even in a collision, make sure you follow all of the proper procedures—call the proper authorities, get the names and information of all the witnesses, take pictures, get the other vehicle's information and contact your insurance company. Follow these guidelines no matter how the other party wants to handle the incident.

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