Five Top Insurance Scams to Watch Out For

(Image credit: Getty Images)

By Karl Susman, CPCU, LUTCF, CIC, CSFP, CFS, CPIA, AAI-M, PLCS

published 28 February 2025

There are so many scams out there that target people with insurance, people who want insurance and people who want more from insurance that I thought it’d be a good idea to bring them to your attention. As it is said, forewarned is forearmed. So get ready to get armed!

1. Accidents that are deliberately caused to scam an insurer

You’re driving along, minding your own business, some Ed Sheeran playing through the speakers. A car pulls up to your left at the same time that another car pulls in front of you, darn near hitting your front bumper, and just as quickly slams on the brakes.

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The car next to you blocks you from swerving to avoid hitting the car in front, so you do the only thing left — you pound your foot on the brake for all it’s worth. Unfortunately, Sir Isaac Newton and his laws of motion come into play, and you don’t have enough time to avoid rear-ending the car in front of you.

Little do you know that the drivers of the car to your left and the car you hit are working together in this scheme to commit insurance fraud by causing this accident — and, more specifically, to put the blame on you so your insurance company will have to start cutting some checks.

Karl Susman

Karl is an insurance agency owner, insurance expert witness in state, federal and criminal courts, and radio talk show host. For more than 30 years, Karl has helped consumers understand the complex world of insurance. He provides actionable advice and distills complex insurance concepts into understandable options. He appears regularly in the media, offering commentary and analysis of insurance industry news, and advises lawmakers on legislation, programs and policies.

To avoid falling victim to this scam, don’t speed and keep as much distance as you can between you and the car in front of you, and if you see two cars who might be moving to box you in, slow down if you can. If an accident occurs, be sure to let your insurer know that you suspect a setup/fraud. Many of these people will already be in the system for having hundreds of claims.

2. Websites that claim to help, but all they do is collect your personal information

You love paying for your insurance premium — it is truly one of your greatest joys in life. However, every once in a blue moon, you decide it may be worth your effort to do a little shopping for another insurance policy. You grab your phone and do a Google search for something like “best auto insurance price.”

As fate would have it, there is no shortage of links for you to pick from. One even purports to do the shopping for you. So you quickly begin thumbing in all of the information it is asking for. Your name, date of birth, address, you name it.

After you’ve handed over all of this personal information, you are provided with links to other web pages. Some are just insurance companies you’ve heard of, some are other search links. Wow, you didn’t get a quote, just referred elsewhere.

Little do you know that all that information you provided is now headed to the Dark Web to be sold so your identity can be stolen.

To protect yourself, avoid websites that claim to “shop for you” or “do the work for you” or say that they “work with all companies.” They don’t.

3. "Insurance experts" who promise outsized investment returns on life insurance

Everybody lives and everybody dies, and the life insurance salespeople know that as well as we do. If only there was a way to make some real investment income from your life insurance and not simply have it pay someone else when you die.

Many people feel this way and are therefore thrilled to receive a call, text or email from a “life insurance expert” who has a new, special, unique, once-in-a-lifetime, get-it-while-it’s-still available life insurance policy with an out-of-this-world guaranteed high-cash return. Bingo and cha-ching! Exactly what you’ve been looking for.

Off goes your personal information (see No. 2 above) and some money. You may actually get a PDF that looks like a life insurance policy and has all sorts of good legalese, but in reality it is not even worth the bits that make up the PDF file.

Your money is going to the scammer. You have no life insurance and no investment-earning cash. As Willy Wonka said, “You get nothing!”

You can indeed earn income from some insurance policies, but beware of these red flags:

Someone calls you out of the blue
You get the high-pressure-sales feeling
The deal seems too good to be true

If any of these pop up, check with your state’s Department of Insurance.

4. Discount prescription cards that aren't legit

For the first time ever, you need to get a prescription medication. Some $500 or more later at the pharmacy, you’re thinking that there has to be a way to save money on your prescription medications. A quick search on the interwebs will provide you with a slew of companies offering “discount Rx cards.”

I’m not claiming that all discount prescription cards are bad. I’m just saying that there are some out there that do not provide what they claim to. They are not insurance policies — they claim that if you pay to join their “club,” you will get discounts. (You don’t.)

If you’re looking to buy a discount Rx card, check the company with your state’s Department of Insurance to verify it is legit.

5. People who unexpectedly show up at your door and offer to help you resolve a damage claim

Having an insurance claim sucks. Not because of your insurance company and its claim handling, but because a claim means a loss has occurred. To pour salt on that open wound, here come the claims scammers.

So say your home has been damaged and you’re waiting for your claim to be settled. Then you hear a knock on your door. A well-dressed man says he noticed the damage to your house — let’s say it’s the roof — and can help.

The company he works for specializes in roof claims and working with insurance companies to ensure your roof is fixed or replaced fast. This is your lucky day! (Not!)

He says that all you have to do is sign some papers, give him a deposit, and his company will get to work on it for you. Off goes the man and your money, and you never hear from or see that fella again.

The lesson here is: Don’t do business with people who come to your door uninvited without first researching their company. Instead of signing anything and/or handing over a check, ask for a card and say you’ll reach out to them if you want to pursue working with them.

What’s a consumer to do?

A good golden rule is to remember that if something sounds too good to be true, it likely is. If the going rate for something is $1,000 and you see one outlier charging $200, think “fraud” before thinking how brilliant you are for finding that deal.

If someone uninvited shows up at the most fortuitous time, check them out with a skeptical eye. Remember: When in doubt, pause, think and ask a lot of questions.

Want to learn more about insurance? Visit KarlSusman.com.

Disclaimer

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

Karl Susman is an insurance agency owner, insurance expert witness in state, federal and criminal courts, and radio talk show host. For more than 30 years, Karl has helped consumers understand the complex world of insurance. He provides actionable advice and distills complex insurance concepts into understandable options. He appears regularly in the media, offering commentary and analysis of insurance industry news, and advises lawmakers on legislation, programs and policies.