Penalties for car insurance fraud

Written by stephen hicks
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Penalties for car insurance fraud
Penalties for auto insurance fraud can include jail time. (handcuff image by Marek Kosmal from

According to the Coalition Against Insurance Fraud, fraudulent injury claims nationwide in 2007 increased payments by up to 18 per cent when compared to 2002 numbers, and the trend still continues. Especially when money is tight, it can be tempting to pad an insurance claim for injuries or damages in hopes of getting more than you deserve. Penalties for doing so, however, can be quite severe, whether you run a large-scale fraud ring or file one fraudulent claim.

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Criminal Record

Insurance fraud is a crime in all 50 states. Though the severity of the crime and its punishment vary by state, you will always have a criminal record when you are convicted of insurance fraud. In some states, it is a felony conviction. Even after you serve your time and pay any required penalties, the conviction will continue to make your life difficult. You will have more trouble finding employment, since many businesses will not hire felons.


<p> reports that all 50 states mandate jail time for car insurance fraud convictions. The Insurance Institute of Michigan states that conviction there brings up to four years in prison. Because auto insurance fraud costs insurers so much money each year, and therefore results in higher insurance premiums for all customers, prison penalties have increased in recent years. The Cheaper Car Insurance Act of 2010, written by Senator Charles Schumer of New York, proposes up to 15 years in prison per offence for fraud ring masterminds.

Financial Penalties

An auto insurance fraud conviction in any state will likely come with financial penalties in addition to jail time. Michigan requires fraud convicts to pay restitution on the funds they defrauded and levies a fine of up to £32,500 as of October 2010. Senator Schumer's proposed legislation would levy fines up to £65,000. These fines could even exceed that amount if the total cost of the fraud is in excess of that limit.

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