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It might surprise you, but many people are setting their cars on fire, abandoning them or reporting them stolen to get out of the car payment they can’t afford in hard times. For many, it’s enough to not have the extra bill saddled onto rising debt, but for others, claiming theft or loss on their car insurance is part of their plan to financial gains.
Studies show that insurance fraud is at increased levels when the economy is in decline, as it has been this past year. From cars being dumped in the Great Lakes to vehicles set on fire in Las Vegas, the U.S. has seen more insurance fraud claims than it’s seen in years. Staging car accidents, too, is a form of car insurance fraud.
The goal of these crimes is to claim that a car was stolen and get the insurance settlement money. For the ever-increasing unemployed sector of the country, this lump payment is all too tempting.
But the consequences, if caught, are severe. Anyone found guilty of car insurance fraud is sent to jail for a felony, and faces up to 4 years and $50,000 in fines, on average.
The Numbers
Car insurance fraud doesn’t just affect those who do it. The Insurance Research Council said that in 2007, car insurance fraud added $4.8 to $6.8 billion to auto claim payments. You can bet that’s being passed on to other innocent policyholders.
The Dangers of Insurance Fraud
Going to jail is an obvious consequence if you’re caught lying about your car being stolen or burned. But there are other consequences, such as physically injuring yourself. There have been many reported cases of people burning themselves and needing medical treatment when they were attempting to set their cars on fire. A word to the less than wise: don’t do it!
Also, staging an accident can get innocent bystanders hurt, as well as you and any other drivers you involve in your ploy.
How to Avoid Insurance Fraud
If you’re in a tough spot and are having trouble paying your car payment or lease, there are legal alternatives to insurance fraud. Repossession, too, isn’t the best way to go, as you still have to pay your car loan off if the car is repossessed, and it stays on your credit for 7 years.
1. Contact your lender. The best place to start is to contact your lender and let them know you’re having difficulty paying off your loan. They may be able to make temporary special arrangements for you to pay a lower amount or put a hold on your loan.
2. Sell your car. Sure, you don’t want to, but if you can’t afford it, sell it and pay off your lender. Then buy a car you can afford, preferably one without payments.
3. Trade in your car. Again, getting a cheaper model and paying what you owe is a smart idea in this case.
4. Transfer the lease. If you lease your vehicle, ask your leasing company if they will allow you to transfer the lease. There are websites where you can post your car as an available lease transfer.
