Chelsey Tucker graduated with a Bachelor of History degree from Metropolitan State University in 2019. She now writes about insurance with her specialty being life insurance and has been quoted on Help Smart Phone and MEL Magazine.

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Dan Walker graduated with a BS in Administrative Management in 2005 and has been working in his family’s insurance agency, FCI Agency, for 15 years. He is licensed as an agent to write property and casualty insurance, including home, auto, umbrella, and dwelling fire insurance. He’s also been featured on sites like

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Reviewed by Daniel Walker
Licensed Auto Insurance Agent

UPDATED: Mar 19, 2020

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Penalties for government disability insurance fraud are steep and defined by the Social Security Act of the U.S. Code. Depending on the severity of the fraud, the fine could be a few thousand dollars or up to $250,000 plus a five-year stay in jail.

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Of course, the type and the amount of fraud involved make a difference. A relatively minor case of fraud (such as a person who provides false evidence in order to increase his income) may require the insured to pay a penalty equal to the amount of money he hoped to receive extra. Needless to say, the administration reserves the right to stop sending all disability income if evidence of a fraud becomes known.

Private Insurance Companies and the Social Security Administration

What if the fraudulent person tries to swindle a private disability insurance company but is caught? Depending on the nature of the crime, a criminal investigation may be conducted, or the insurance company can handle the case on their own. Most insurance companies have investigative departments set up to analyze suspicious cases.

Penalties are left up to the private insurance company, as well as the state office, if a crime occurred. For the most part, penalties do correspond to the amount of money requested in the fraud attempted.

The severity of the fraud will also determine whether criminal conviction results in a misdemeanor or a felony. Government charges from the SSA can even implicate a fraudulent claimant in “theft” and more severe punishments can be tacked on. Any accomplices to fraud will also face stiff penalties, including doctors who fabricate medical evidence.

What are some examples of fraud? These might include:

  • Creating fake paperwork
  • Withholding relevant information
  • Exaggerating damages
  • Using other dishonest methods

The crime usually does match the penalty. So a minor incident may only require community service, a criminal record and a misdemeanor fine. A misdemeanor charge would qualify for fraudulent claims involving $300 or less.

Another unfortunate effect of insurance fraud on the overall insurance industry is that these cases result in premium inflation. In order to recover the cost of insurance fraud, the insurance company must now increase the price of premiums for everyone.

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Proving a Disability is Legitimate

Since disability insurance covers several mental and emotional conditions, proving fraud for an emotional disorder is far more challenging than proving or disproving a physical handicap. In order to approve a claim, the insurance company insists that several conditions must exist. A mental health doctor would have to provide a testimony as well as evidence to support that the claim meets the conditions set forth.

It’s important to understand that willful deception (aka fraud) is not the same thing as simply filing for a claim you don’t deserve. If you attempt to get disability insurance and the insurance company finds you unqualified, you will not be penalized. However, if you were to knowingly use another person’s medical information, make false statements, or create a fictional identity then you would absolutely be breaking the law and could be subject to prosecution. One area you do want to be careful in is billing the company for equipment. This could also qualify as fraud, though in some rare cases, such actions might actually be accidental.

If you have a disability or have questions about receiving disability income for a short or long period of time, then talk to your doctor. He or she might be able to provide you specific medical information or may be able to advise you on what qualifies as a true disability scenario.

This type of insurance is very important to people who legitimately become injured. This is not a policy you can comfortably live without, since roughly one person a day in America is seriously injured every passing second.

Enter your zip code right now to get started comparing disability insurance rates today!