10 Insurance Scams Homeowners Frequently Try to Pull

Many homeowners fudge values a bit or make less-than-honest estimates when filing a claim with their homeowners’ insurance carrier with the attitude that they’re only taking back money that they’ve already paid. This attitude is not only criminal, but also costs the community money in raised premiums across the board. Here are some of the most commonly filed bogus homeowners insurance claims.

1. Overstating Value – In the event of a break-in, determining the value of your stolen possessions can be difficult. Overstating the value of a family heirloom or other object with more sentimental than monetary value can be tempting, but it’s important to remember that doing so is insurance fraud.
2. Storm Damages – When a home sustains damage from storms or other events that are covered by their policy, some homeowners are tempted to blame damages that occurred through non-covered events on the storm as well. Unscrupulous homeowners may also damage their own property to receive a settlement.
3. Staged Fires – The idea that a homeowner could set fire to their own home is a shocking one for most people, but it does happen. When facing foreclosure or other financial devastation, some desperate homeowners have been known to resort to arson. In addition to criminal insurance fraud charges, they almost always face arson charges as well; this can add up to hefty fines and significant prison time.
4. Salesman-Induced Fraud – This common scam is typically perpetrated by a salesman with most clients being unaware of the legalities; touting the ability of their equipment to detect “microscopic siding damage from hail” or other damages, these shady salespeople bill insurance companies to replace virtually undamaged siding or other surfaces.
5. Underwriting Fraud – Most homeowners don’t realize that being dishonest on insurance applications or refusing to disclose important information is considered fraud, and can carry criminal penalties. Fudging the truth to get a better premium may be common, but it’s unethical and illegal.
6. Inflated Claims to Avoid Deductibles – For cash-strapped families, covering the deductible to make repairs can be a challenge. When less-than-reputable repairmen suggest inflating the claim to avoid the expense, some homeowners will jump at the opportunity without considering legal ramifications.
7. Orchestrated Vandalism – Offering a portion of the proceeds from an inflated claim to someone who carries out a solicited act of vandalism is a common type of insurance fraud. This willful breaking of the law for financial gain is a serious offense.
8. Selling or Removing Insured Property – Selling, giving away or hiding insured property for the purpose of filing an insurance claim is a common scam that homeowners pull, despite how easily discovered it can be.
9. Filing a Claim on Property That Never Existed – In a cousin to the overstating scam, some homeowners will file claims for damaged property that they never owned in the event of a catastrophic loss, due to the difficult nature of tracking losses in such situations.
10. Taking a “Kick Back” From Contractors – Unscrupulous contractors sometimes offer homeowners a “kick back” from the insurance claim in return for using their services for repairs. In addition to being fraudulent and illegal, this also puts homeowners in the position of trusting a disreputable contractor to perform essential repairs to their home. Should the contractor default on an agreement or provide shoddy work, the homeowner is left with no legal recourse due to their own unethical and illegal behavior.

The Insurance Information Institute estimates that fraudulent claims on homeowners policies cost insurers up to $30 billion per year. As a result of incurring this staggering expense, insurance companies raise premiums and rates; committing insurance fraud isn’t just stealing from your insurance carrier, but also from your neighbors.