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Homeowners Insurance Fraud Explained

Property or homeowners insurance is essential to protect your home and belongings. This is regardless of owning the property or renting. Unfortunately, home insurance fraud is becoming more prevalent in recent years. According to the industry’s estimates, casualty/property insurance fraud accumulated to more than $30 billion a year nationwide.

Insurance fraudsters are experienced criminals who steal large sums of money through insurance claim mills or business scams. As a result, most insurance companies inflate their charges to cover unnecessary losses. Homeowners insurance fraud is a serious crime that carries heft charges, including jail terms.

What Counts as Fraud on Homeowners Insurance?

Home insurance fraud occurs when someone knowingly submits an inflated claim to their renters or homeowners policy, more than the value of the damaged or lost property. In addition, submitting a misleading or false claim to receive excessive compensation is also a homeowners fraud.

Unfortunately, 10% of all the money on casualty/property insurance claims is paid out to fraudulent claims. For example, a homeowner can lie about the details of the home when purchasing a policy to receive a lower premium but exaggerate the damages and losses when filing for a claim to receive a hefty payout from the insurance company.

Types of Home Insurance Fraud

Home insurance fraud takes various forms, including:

  • Concealing during an insurance application that the property is commercial or rental
  • Intentional damage to the property to file for a claim. One of the most intentional damages to a property is arson. In some states like New York, under article 150, the penal law allows you to be charged with a fraudulent insurance claim and arson.
  • Staging a fake burglary or faking property theft
  • Overstating the value of stolen or damaged items in a covered claim.
  • Trying to cover deductibles. For instance, asking a maintenance specialist to overstate a bill or estimate to cover deductibles can be a form of homeowners insurance fraud.
  • Providing false information about the extent, cause, location, or date of the actual damage
  • Staging an accident that damages the property to make a liability claim. Altering medical bills for treating unexisting injuries is also a fraud offense.

These are some common types of insurance fraud that trigger legal action. Seek legal help if you are under a homeowners insurance investigation concerning a claim you laid.

Home Insurance Fraud vs. Life Insurance Fraud

Life insurance is money paid out after a set period or after the insured person’s death. Unfortunately, many insurance companies can deny legitimate claims, requiring the affected family to seek legal counsel. ERISA claims lawyers can help you file an appeal if your claim is denied.

However, some people file for false life insurance claims by misinterpreting facts on the insurance claim, inflating claims, or staging an accident. Like homeowner insurance fraud, the end goal is a financial benefit for an individual or group.

Can I Report a Home Insurance Fraud Scheme?

If you suspect an ongoing scheme or an already done home insurance fraud, you can start by reporting to the insurance company, primarily through their website portal. However, whistleblowing on such a matter can jeopardize your life; therefore, an anonymous report is the most recommended.

Insurance fraud of all types is becoming prevalent, and there’s a national bureau committed to managing it. File a report or leave a tip with the National Insurance Claim Bureau. There are also various prevention bureaus or government hotlines you can contact to report your claim, mostly with discretion.

In addition, if you think you have unintentionally been involved in a homeowner insurance scam, contact your provider directly. This will protect you from being part of the crime later on when it is discovered.

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