There was a terrible storm that pulled up one corner of your roof and caused a leak. Your homeowner’s insurance will cover the cost to repair the affected area. However, your brother-in-law runs a roofing and drywall company. He suggests that the two of you exaggerate the damage so that you can file a claim to have the entire roof replaced and all of the second-story drywall ceilings redone.
You benefit because not only do you get the damage repaired but also cosmetic improvements that could increase your home’s selling price, while your brother-in-law gets to make a lot of guaranteed income because insurance money is easier to collect than the money owed by individual homeowners. Situations like this may seem mutually beneficial, but they can potentially lead to insurance fraud charges.
Insurance companies don’t just sign checks blindly.
You paid for coverage for years without ever making a claim. You assume that this first claim will likely fly under the radar because there is enough credible damage to justify a claim. What you may not consider is that the insurance company very well might conduct an independent investigation because exaggerated claims are a leading source of fraud.
They may send an adjuster out to document the damage. They might even require that you get bids from other companies, a process which could show that your initial bid was far too high or overstated the damage.
If an insurance carrier pays out on a claim that it later finds to be fraudulent or has written documentation of you fraudulently exaggerating the nature of the claim, they might not only refuse to pay you but could also bring the issue to the attention of law enforcement, which could potentially result in insurance fraud claims. If you find yourself accused of insurance fraud, discussing your issue with someone early in the process can help you defend against those charges.