Buyer Beware: Auto Insurance Scam Tactics

Posted on Jan 7th, 03:37 pm, under Auto Insurance 101

All drivers are required by law to purchase car insurance. This means car owners set aside millions of dollars every year for regular insurance payments. With that kind money going around, it also means that the industry is rife with insurance scams and fraudsters. This is why it pays to be familiar with the common tactics that scam artists use before buying auto insurance.

1. Fake insurance policies

You don't need to look hard to find frauds. Insurance scammers place advertisements for cheap car insurance online and in papers, and many go so far as to rent offices in order to appear as reputable and real as possible. Invariably, someone takes the bait and pays for a fake policy and insurance card. Usually, victims only find out that their supposedly "legitimate" auto insurance is a fake at the worst of times: during an accident, when they're pulled over by police, or when they register their vehicle. This puts them into even deeper legal and financial trouble.

One thing to watch out for when buying coverage: see if the agent issues insurance on his or her own. Technically, they're not supposed to be able to do that, because as "agents" they only represent the insurance company, and thus they don't have the authority to give you a policy then and there. 

2. Novelty and fake insurance cards

It doesn't matter whether you're carrying a fake insurance card either unknowingly or on purpose, you're just as liable either way. Using a fake insurance number carries a risk of felony, entails huge payments in the event of accidents or injury, and raises insurance costs for honest drivers. 

3. Lowballing

While hunting around for the best insurance deal possible, you see that one company offers a rate that's much lower than anything else on the market. Then, once you've signed up and paid them, they tell you that there was a "company rate error" and that your real premium is so many dollars higher than the original price you were given. 

Avoiding this kind of lowballing can be tricky, but one tip is to check if they offer free coupons or processing vouchers. If you're dealing with an ethical, reputable company, it won't have to resort to these schemes to get your business.  

4. Offering insurance quotes in exchange for personal information or money

Fraudsters often call potential victims and offer a free auto insurance quote in exchange for personal information. This is a favored method for identity theft. Don't fall for it. The only thing you need to give to get an actual quote is the details about your car. In addition, if they tell you that you need to pay a fee before you can get a quote, walk away. Almost all reputable companies offer their insurance quotes for free nowadays. The only thing you need to pay for is the premium, not the quote. 

In general, if you're uncertain about buying auto insurance, steer away from companies that nobody has heard of, or those with no background you can research. If you're dealing with a new company, ask current customers for their opinion on the service. The more information you can get, the better.

If you want to be really sure, you can always buy your coverage from one of the big corporate auto insurers, such as State Farm and Geico.

Using a fake auto insurance policy is a crime, whether or not you were willfully doing so or not. The potential legal and financial problems far outweigh any benefits. Remember, always do your research and get as much information and confirmation on your dealer before signing anything binding.