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How Fraud Can Damage Your Insurance. Along with the invention of insurance was also the invention of insurance fraud. Auto fraud and life insurance fraud are some of the types of fraud that you may encounter if you already have an insurance. This article is very beneficial for those people who have insurance since it will give them an insight of what fraud really is. The gain of money is probably the common reason why a person would commit fraud. Because of the nature of insurance policies, they are rife with potentials for exploitation. Aside from inflating the value of the lost item, insurance policies are commonly exploited by individuals claiming more loss than what they have gained. Insurance fraud is generally divided into two classifications – soft fraud or hard fraud. Soft fraud is the more common of the two, and is also called opportunistic fraud. It is also important for you to know if an insured party is a legitimate claim, because once you have proven that it is a legitimate claim, then the soft fraud will occur. Soft fraud, for example, happens when an insured individual is involved in a car accident and claims that more damage was done to the vehicle than is true. Soft fraud can happen at the start of a new insurance policy, when an individual purchasing a policy misrepresents their actually situation in order to get a lower premium. Another example of this kind of fraud is those people who buy a car insurance policy, however, they do not tell the truth about the number of miles on the vehicle just so that they can get a lower premium.
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A hard fraud can also happen if an individual planned to have a loss just to receive an insurance payout. This kind of fraud usually happens to a stolen vehicle. Different forms of crimes were usually involved in hard fraud.
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It is undeniable that one of the most popular fraud there was is the auto insurance fraud. It is estimated that in 1996 as much as 36 percent of auto-insurance claims were fraudulent in some way. Soft fraud in auto insurance fraud includes what was mentioned above, but also situations where a person claims an injury that did not actually occur during the accident in question, or if someone registers their automobile in a location that the insurance is less expensive. For example, a person who lived in an urban area will opt to register his car to a rural area in order to gain a lower premium.