6 Tips for Avoiding Insurance ScamsSurviving a natural disaster is hard enough without the worry of insurance fraud and identity theft. Unfortunately, both are common after disaster strikes. Survivors are vulnerable and criminals take advantage any way they can.

According to the Federal Bureau of Investigation (FBI), insurance fraud costs more than $40 billion dollars a year, an astounding figure that does not even include health insurance. Consequently, the average American will pay up to $700 in increased premiums each year due to insurance fraud. Which begs the question, how do you identify insurance fraud and how do we combat it?

Insurance fraud is wrongful or criminal deception intended to result in financial or personal gain as it relates to insurance premiums, payouts, coverage, etc. To see a list of common fraud schemes, detailed by the FBI, click here.

Unfortunately, the threat of jail time and fines do little to deter criminals from committing fraudulent activity. Scams involving less than $1,000 are considered misdemeanors, while scams involving greater than $1,000 are felonies. Punishments include one to 25 years in prison and fines ranging from $1,000 to $100,000.

It does not matter if the act is considered hard fraud, deliberately falsifying information, or soft fraud, exaggerating the truth or misrepresenting details, both are crimes. Yet, the Coalition Against Insurance Fraud classifies 10% of property-casualty insurance losses as fraud.

Nearly all states now have an insurance fraud bureau. The National Insurance Crime Bureau also works to protect consumers by partnering with insurance companies to report and address fraud. To prevent insurance rate increases, insurance programs must authenticate the claims processed. False insurance claims only increase costs that are then passed on to the homeowner.

The insurance industry as a whole, specifically home insurance and private property insurance, is seeing an increase in fraudulent activity. Insurance scams, Federal Emergency Management Agency (FEMA) scams, National Flood Insurance Program (NFIP) scams, charity scams, and price gauging are only a few types of fraud on the rise in Florida in the wake of Hurricane Ian.

While not all Florida homeowners are required to have flood insurance, it is a wise choice given the increased hurricane risk in the state. What's the difference in flood and homeowners’ insurance? Flood insurance protects a home against structural damage, issues, and loss resulting from rising flood waters while homeowners’ insurance does not. According to the NFIP, only one inch of flood water can cause nearly $25,000 in damage.

Hurricane Ian is being classified as the second-largest disaster loss in U.S. history with $60 billion reported in losses. The largest loss was Hurricane Katrina in 2005 with just under $90 billion in losses after inflation adjustment, according to the Insurance Information Institute.

Tips for Avoiding Scams

  • Begin by validating your insurance agent and ensuring that they are properly licensed. To verify, contact your state insurance department.
  • Do not pay for disaster assistance. FEMA and other aiding agencies will not charge you for assistance.
  • Take photos immediately following a disaster to properly document the damage. (Pro-Tip: Ahead of a hurricane, take video footage of your home and belongings to catalog your property.)
  • When donating to a charity after a natural disaster, verify the site and only give monetary donations with a credit card. Consider donating your time by volunteering with clean-up efforts.
  • When working with FEMA and other government agencies, request identification to verify authenticity. Do not provide personal information to an unverified individual.
  • If you suspect identity theft, contact the Federal Trade Commission.
     

To learn more about reporting fraud and suspicious activity, click here.

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