What counts as fraud on homeowners & renters insurance?
Home insurance fraud generally involves a deceptive act against an insurance company, usually for financial gain. By some estimates, about 10% of all the money property/casualty insurance companies pay out goes to fraudulent claims.
Common examples of homeowners insurance fraud include lying about details of the home when buying a policy to get a lower premium, exaggerating the damages when making a claim to get more money, "covering your deductible" by coordinating a higher bill with a repair person, or even making up a claim for something that never happened. Sometimes people who wouldn't be eligible for a particular policy or coverage may lie or intentionally leave out information about their circumstances to get coverage. In extreme cases, people may destroy their own property to get insurance money.
How serious is property insurance fraud?
Depending on the details of the case, including the amount of money involved and the state where you live, insurance fraud can be a felony offense. Felonies are serious crimes and usually carry a sentence of one or more years in prison in addition to fines. In most states, convicted felons lose the right to vote, at least temporarily.
What are the penalties for renters or homeowners insurance fraud?
Even in cases where the homeowners insurance scam doesn't reach the felony level (and even if you are acquitted), just being investigated for insurance fraud may make it difficult to get insurance in the future. Consider, too, that many home financing agreements require homeowners insurance in the loan terms, so being investigated for or convicted of homeowners insurance fraud may make it difficult to buy a home. If you're able to secure insurance after a homeowners or renters insurance fraud case, your policy may be more expensive than it would otherwise be.
How can I protect myself from homeowners insurance fraud?
Simply be honest with the insurance company. When you buy a homeowners insurance policy for the first time, they'll ask questions about the home's location, condition, your claim history, and more. Answer those questions truthfully. When something happens, and you want to make a claim, contact your insurance agent promptly and be honest about what was stolen or damaged. If you receive a check for repairs, be sure to get the repairs done. If you have to make another claim later on and the original repairs were never performed, insurers may get suspicious, especially if you try to claim the original damage again.
Another way to protect yourself is to hold others accountable. If a contractor offers to "cover your deductible," they probably aren't offering to pay for it themselves. That may mean that they'll give you a discount and then bill your insurance for more than you actually owe them. That way, the insurance payout will also pay for your home or renters insurance deductible. Accepting this kind of offer may get you involved in a homeowners or renters insurance scam even if you aren't aware of what the person is doing, so be careful if a repair person, contractor, or other vendor is offering something that seems too good to be true.
If you suspect or find out after the fact that a repair person, contractor, or other vendor has been doing something dishonest (say, the bill they give you and the amount the insurance company pays out don't match), you should report it right away.
Check your bills from vendors against the payout from the insurance company. If the payout is higher than the bills, someone may be trying to cheat your insurance company.
How do I report homeowners or renters insurance fraud?
Insurance fraud of all types is so prevalent that there's a national bureau dedicated to managing it. If you believe that you've discovered evidence of insurance fraud, you can contact the National Insurance Crime Bureau to report it or leave a tip. Many state governments also have fraud hotlines or prevention bureaus you can contact.
If you think you might have unintentionally been involved in a homeowners or renters insurance scam – like a vendor overcharging your provider – you should also contact the provider directly to let them know. This can help protect you from being blamed as part of the crime if it's discovered later on.