Disability insurance fraud describes some form of lying to insurance companies or to the Social Security Administration about an injury, illness, your income, or other details for financial gain.
If you commit disability insurance fraud, your insurance company may deny a claim or cancel your coverage, and you could face fines and even jail time.
What is disability insurance fraud?
Disability insurance fraud is when you try to collect insurance benefits or lower your rates by lying. There are three types of disability insurance fraud: private disability fraud, workers’ compensation fraud, and Social Security fraud.
Many types of fraud are intentional, but you can actually commit insurance fraud without realizing that you did anything wrong. And you can still be charged with fraud and face legal repercussions even if the fraud was unintentional.
→ Read our glossary of other terms related to disability insurance
Examples of disability insurance fraud
When you hear “insurance fraud,” you might imagine wide-ranging plans to steal huge sums of money, but fraud comes in many sizes.
According to the Social Security Administration, disability insurance fraud may include hiding extra income or concealing your recovery and still receiving benefits, using someone else’s benefits, using a dead person’s benefits, and more.
Other examples of disability insurance fraud may include:
Misrepresenting yourself when you sign up for coverage
Lying about having an injury or illness
Exaggerating a legitimate injury or illness
Returning to work without reporting it
Faking documents, like test results and doctors’ statements
Taking part in a plan to commit disability insurance fraud
What happens if you commit disability insurance fraud?
The penalty for committing disability insurance fraud depends on the amount of money you received, your role in the fraud, and other factors.
For example the penalties for Social Security Disability fraud may include up to 5 years in prison or a fine. You’ll face up to 10 years in prison or a fine — and a felony charge — if you’re a claims representative, translator, or medical professional and someone pays you to help them commit disability insurance fraud. [1]
As far as non-legal consequences go, you won’t necessarily face arrest if you filled out a policy application incorrectly or left off information while making a claim, but your insurance company can still deny your claim and may even cancel your policy. If you’re worried about facing legal action, consult a lawyer or legal professional.
How do companies find out about disability insurance fraud?
The FBI estimates that the total cost of insurance fraud is about $40 billion a year. With this much money at stake, insurance companies understandably spend time and money preventing fraud. [2]
Insurance companies try a lot of different methods to catch fraud, like using independent doctors to verify a diagnosis, requesting information from your personal doctor, and even observing you to make sure you’re unable to work.
Insurance companies also use eligibility rules to prevent fraud. If you have a modified own-occupation or any-occupation policy that says you can’t qualify for benefits if you’re able to work at all, your insurance company may check in on your medical condition after a few months to see if you still qualify for coverage.
How to avoid disability insurance fraud
You can avoid committing even minor disability insurance fraud by answering any questions your insurance company asks honestly.
When you sign up for coverage, make sure to provide accurate financial information (like your W2, tax records, income statements) and don’t try to hide any pre-existing conditions.
If you make a claim, do your best to be honest about your condition and provide a consistent account of your symptoms. Don’t exaggerate any details to improve the chances of getting your claim approved.
It can help to document any conversations you have with your insurance company or any medical examiners so you can refer back to them. You don’t want to give your insurance company any reason to deny a claim on suspicion of fraud.
How to report disability insurance fraud
The Office of the Inspector General at the Social Security Administration has a dedicated phone, mail, and even fax line that you can use to contact the agency about suspected Social Security fraud.
If you report fraud online using the Social Security Administration’s online form, you can choose to report anonymously, so if you’re wary about providing your name, contact information, and Social Security Number, you don’t have to.
Toll-free phone number: 1-800-269-0271
Fax: 1-410-597-0118
Most insurance companies have their own systems for reporting fraud, and some even have hotlines to call. You can also report suspected insurance fraud to the National Insurance Crime Bureau (NICB).
Frequently asked questions
How serious is disability insurance fraud?
Disability insurance fraud is serious. Committing insurance fraud is illegal and can lead to loss of coverage, denied claims, fines, and jail time.
Do you know if you’re being investigated for fraud?
It depends on the situation. You might receive a letter telling you that you’re under investigation for a crime, but your insurance company won’t necessarily let you know it suspects you misrepresented yourself when you sign up for coverage when it’s investigating a claim.
Is disability insurance fraud a felony?
You can be charged with a felony for committing disability insurance fraud, but it depends on the scale of the fraud and your role in it. Consult a legal professional if you have any questions.
