DEFINITION of 'Insurance Fraud'

An illegal act on the part of either the buyer or seller of an insurance contract. Insurance fraud from the issuer (seller) includes selling policies from non-existent companies, failing to submit premiums and churning policies to create more commissions. Buyer fraud includes exaggerated claims, falsified medical history, post-dated policies, viatical fraud, faked death or kidnapping, murder and much more.

BREAKING DOWN 'Insurance Fraud'

Insurance fraud is basically an attempt to exploit an insurance contract. Insurance is meant to protect against risks. It isn't meant to be a tool to enrich the insured. Although insurance fraud by the policy issuer still occurs, the majority of cases have to do with the policyholder attempting to receive more money by exaggerating a claim. More sensational instances such as faking one's own death or killing someone for the insurance money are comparatively rare.

RELATED TERMS
  1. Cooperation Clause

    An insurance contract clause that requires the policyholder to ...
  2. Personal Lines Insurance

    Property and casualty insurance products for individuals that ...
  3. Classified Insurance

    Insurance coverage provided to a policyholder that is considered ...
  4. Cover Note

    A temporary document issued by an insurance company that provides ...
  5. Transfer Of Risk

    The underlying tenet behind insurance transactions. The purpose ...
  6. As Their Interests May Appear (ATIMA)

    Text in an insurance policy that allows other parties to be added ...
Related Articles
  1. Insights

    What You Need To Know About Insurance Fraud

    Insurance fraud is as old as commerce. Discover the types of life insurance fraud and how they affect you.
  2. Insights

    How Insurance Companies Detect Insurance Scams

    Insurance companies have full fraud detection departments tasked with both preventing scams and recouping money paid out for false claims.
  3. Insights

    Mortgage Fraud: Understanding and Avoiding It

    Mortgage fraud is dangerous, learn how to detect it.
  4. Insurance

    Understanding Your Insurance Contract

    Learn how to read one of the most important documents you own.
  5. Insurance

    Bundle Your Insurance For Big Savings

    Bundling your insurance can save you money and time. Read on to see how get the most out of multiline insurance discounts.
  6. Insurance

    How Much Life Insurance Should You Carry?

    Learn how much - if any - insurance you really need.
  7. Insurance

    Explaining Insurance

    Insurance is a form of contract between an individual and an insurance company that spreads risk in exchange for premium payments.
  8. Insurance

    Life Insurance: How Long Does It Take To Get Paid?

    How to file for a life insurance payout – and how long it takes to receive it. Plus, new ways to plan for payments that provide an income stream.
  9. Insurance

    12 Insurance Questions for High Net Worth Families

    High net worth families should ask themselves these 12 questions regarding comprehensive insurance.
RELATED FAQS
  1. Can your insurance company cancel your policy without notice?

    Learn about your rights as an insured when it comes to your insurance policy being canceled, including how to access your ... Read Answer >>
  2. What is the average return on total revenue for the insurance sector?

    Learn about the three main segments of the insurance industry, and find out what the average return on revenues is for the ... Read Answer >>
  3. What is the difference between the death benefit and cash value of an insurance policy?

    Understand the difference between the various components of a life insurance policy including the death benefit and a policy's ... Read Answer >>
  4. What are some examples of when insurance bundling is a bad idea?

    Learn about situations where insurance bundling may not be a favorable option. Bundling insurance is often a good idea, but ... Read Answer >>
  5. What are some examples of industries that practice price discrimination?

    Understand the various types of insurance coverage offered in the insurance marketplace, and learn why each policy should ... Read Answer >>
  6. What caused the European / Eurozone debt crisis?

    Understand how insurance companies price insurance premiums, and learn the importance of data and statistics in the insurance ... Read Answer >>
Hot Definitions
  1. Portable Alpha

    A strategy in which portfolio managers separate alpha from beta by investing in securities that differ from the market index ...
  2. Run Rate

    1. How the financial performance of a company would look if you were to extrapolate current results out over a certain period ...
  3. Hard Fork

    A hard fork (or sometimes hardfork) is a radical change to the protocol that makes previously invalid blocks/transactions ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  6. Zero Day Attack

    Zero Day Attack is an attack that exploits a potentially serious software security weakness that the vendor or developer ...
Trading Center