Examples Of Home Protection Insurance Fraud; Unknowingly Committed

Every mortgage lender providing loans to homeowners, requires home protection insurance.  This coverage protects the home owner from loss that can occur due to damage. The coverage provides a replacement benefit for your home, cost to rebuild, its furnishings and other valuables that are listed in the policy. Committing insurance fraud is illegal and violates state and Federal fraud statutes.  In most cases, the act of fraud is committed knowingly with intent and purpose to defraud.  There are other activities that a home owner may do that seem to be acceptable, but also constitute fraud.  It is important to understand that whether the fraud was committed knowingly or unknowingly, but often the legal repercussions can be the same, regardless of your intent.

You should understand acts of fraud, although they may seemingly be a simply innocent mistake.  

Filing Claims for More than Fair Market Value

When a loss occurs, you are required to file a claim with the insurance company in order to access the policy benefits. In a home owner insurance claim, you will list the value of items that were damaged or destroyed because of a qualifying event, such as a fire or theft. If you set a value for the item that is higher than the actual or fair market value, you have committed insurance fraud.  This practice is fairly common and is usually done not with the intent to defraud but with a desire to recoup the original purchase value of an item, or a higher appreciated value.  Unless an insurance appraiser sets this amount, you should not use your own figures that could be interpreted as fraud.

Inflating Values in order to Increase Coverage Limits

Setting artificial values for items, for the purpose of obtaining a higher coverage limit, constitutes insurance fraud. This is a practice that may seem innocent and is common but the purpose of insurance is to indemnify or restore the insured to its value.  Because you cannot profit from an insurance loss, inflating values is fraud.

Failing to Disclose Information

When applying for home owner insurance, failure to provide information that is essential to the policy constitutes fraud. Failing to provide information on the condition of an item or the results of an appraisal will result in an insurance policy that is based on false pretenses. In many cases, you may be unaware of your disclosure requirements but working with a licensed agent should prevent this type of fraud.

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