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What is Insurance Fraud?


When someone provides false information to an insurance company in order to gain something of value that he or she would not have received if the truth had been told, they've committed insurance fraud.

In Michigan, this type of dishonest act is classified among the most serious of crimes – it's a felony. Those convicted of the crime face prison time, fines, legal fees and more – not to mention a wide range of negative personal and professional consequences.

Don't let a lie wreck your life or that of someone you know. Learn more about insurance fraud. Know the risks. Know the penalties.

The Act:

Most people view insurance as a type of a "financial security" that can protect them against financial burdens associated with property loss, accidents, or injuries. Those who commit insurance fraud undermine the positive aspects of insurance by taking advantage of opportunities to lie in an attempt to receive undeserved money from their policies.

How do they do it? Some provide false information on an insurance application form to secure a lower policy premium than had they been honest. Others exaggerate the amount of loss on a claim they submit in order to receive a settlement for more than the fair value. Or they "stage" accidents and attempt to get money for injuries that never occurred.

Truth is, there are many ways ill–intended people try to cheat on their insurance coverage. That's why it's a good idea to become familiar with how to avoid making a bad judgment call when faced with similar situations.


Insurance fraud is hardly a victimless crime. When dishonest people take money they don't deserve from insurance companies, this act results in increased policy costs for everyone.

If you pay insurance premiums, you're already a victim of insurance fraud. And some fraud schemes – such as those involving arson or a staged auto accident – can put innocent human lives in harm's way.

This is why insurance fraud is such a serious crime. In Michigan, insurance fraud is a felony, punishable by up to four years in jail and up to $50,000 in fines. There's also restitution, court costs, and lawyer's fees to pay. Plus, those who are convicted get a felony charge on their record that follows them for life, and that can stand in the way of securing employment or housing.

The crime also brings with it consequences on the home front. Someone with a felony conviction often risks damaging his or her relationship with friends and family, is made an outcast within the community, and is viewed as an undesirable employee – or ex–employee, in some cases.

Anyone thinking about committing insurance fraud should think about these life–changing consequences. Why risk wrecking your life through an act of dishonesty? It's just not worth it.