Insurance fraud isn’t just a problem for insurance companies – it can lead to higher premiums for everyone, making it harder for honest homeowners to find affordable coverage. The best way to avoid getting caught up in a scam, either as a victim or an unwitting participant, is to know what to look out for.
In this blog, we’ll explain what constitutes home insurance fraud, highlight some common scams, and share tips on how you can protect yourself.
What Is Insurance Fraud?
Insurance fraud happens when someone intentionally deceives an insurance company to receive a payout they’re not entitled to. This can range from inflating the cost of repairs to making completely false claims. Even if you don’t realize it’s happening, being involved in a fraudulent claim can lead to serious legal consequences.
Here are three of the most common scams to watch out for and how you can avoid them.
Roof Scams & Signing Away Your Insurance Benefits
After a hurricane or heavy storm, your home – especially your roof – might need urgent repairs, and you may receive unsolicited offers from roofing contractors to help with those repairs. But be cautious – not all of these contractors are trustworthy. Some will ask for money upfront and disappear without completing the work, while others may do a shoddy job leaving you with bigger issues down the line.
One tactic unscrupulous contractors used regularly relied on was Assignment of Benefits (AOB) agreements, where they convince you to sign over your insurance benefits to them, allowing them to handle your insurance claim and receive payments directly from your insurer. What would often happen, is they would inflate the repair costs, leading to meritless lawsuits carriers would be forced to defend, resulting in hefty legal fees and expenses. Premiums for all policyholders would rise as a result, to reflect these increased costs. Many of these lawsuits are still winding their way through the legal system.
Because of the uptick in roof scams and insurance fraud utilizing these AOB agreements, Florida banned AOBs beginning Jan. 1, 2023. Some contractors now try to sidestep this by asking homeowners to sign a Direction-to-Pay (DTP) agreement, which operates in a somewhat similar fashion – and could leave you on the hook for thousands of dollars. Don’t fall for this particular roof scam gimmick, no matter what it’s called.
What to Watch for
- Be aware of unsolicited offers: If a contractor shows up at your door without you asking for help, especially after a storm, be cautious. They may promise quick repairs but could disappear once they get your money.
- Understand what you’re signing: Carefully read any documents before signing. If you’re unsure, consult your insurance agent, insurance company, or a legal expert to review it first.
What You Can Do
- Verify contractor licenses and read reviews: Always verify a contractor is licensed by Florida’s Department of Business & Professional Regulation and has good reviews. Don’t be afraid to ask for proof of their credentials.
- Check for preferred vendors: Your insurance company often has a list of preferred, vetted vendors who are reliable and experienced. They can help you with immediate needs like tarping a roof, removing fallen trees, or boarding up windows. Contact your insurer first to see if they can connect you with one of these trusted providers.
- “Just pad the claim a bit” temptation: You may think adding a few extra items or inflating the cost of repairs will help you get more money from your insurer, but this is considered fraud. It’s illegal and can lead to penalties, beyond just having your claim denied.
Inflating Property Damage Claims
It might be tempting to stretch the truth a little when filing a homeowners insurance claim, especially after a stressful event like a hurricane. But even small exaggerations can lead to serious trouble. Some homeowners might try to inflate the value of damaged items, include repairs for parts of the house not actually affected, or claim reimbursement for items they never owned. This is fraud, and it carries legal risks.
What to Watch for
- Shady advice from others: If someone advises you to “get a little extra” to cover a deductible or pad the claim, don’t listen. Following this advice could cost you a lot more than your deductible.
What You Can Do
- Keep it honest: Always be accurate and truthful when reporting damages. Not only does this keep you on the right side of the law, but it also helps ensure your claim is processed smoothly.
- Maintain detailed records: Document all damages with photos and keep any receipts for repairs. The more information you have, the easier it will be to support your claim.
Misrepresentation of Flood Damage
Standard homeowners insurance policies don’t cover flood damage, which requires a separate policy. Unfortunately, some homeowners try to disguise flood damage as something else, like a burst pipe or roof leak, to get coverage under their regular home insurance policy. Not only is this a form of fraud, but your claim could be denied, your policy canceled, and you could be subject to legal penalties, including fines and criminal charges. Committing this type of home insurance fraud will make it difficult for you to obtain homeowners insurance in the future.
What to Watch for
- Reclassifying flood damage: Trying to pass off obvious flood damage as wind-driven rain or another cause might seem like a way to get around not having flood insurance – but it’s still home insurance fraud, and it’s illegal.
- Pressure from others: Sometimes, contractors or even neighbors might suggest filing the damage as something other than a flood. Remember, this is fraudulent and could result in serious consequences.
What You Can Do
- Report damage accurately: Be upfront about the cause of any damage. Trying to bend the truth can lead to claim denials and legal consequences.
- Understand your coverage: Make sure you know what your home insurance policy does and doesn’t cover; ask your agent if you’re unsure. If you live in a flood-prone area, consider adding a separate flood insurance policy to protect your home fully.
Your Best Defense: Stay Informed & Vigilant
The best way to protect yourself from insurance fraud is to stay informed and cautious. Before signing any agreements, get clear answers, verify credentials, and don’t be afraid to ask questions.
Extra Tips
- Do your research: Check reviews, licenses, and backgrounds of contractors or anyone involved in your home and roof repair.
- Contact your insurer first: Before committing to repairs, reach out to your insurance company. They can offer guidance, recommend vetted contractors, and help ensure your claim is handled properly.
Roof Scams & Insurance Fraud: What Every Florida Homeowner Should Know
The best way to protect yourself from insurance fraud is to stay informed and cautious. Roof scams, in particular, can be especially prevalent after hurricanes in Florida, when homeowners are desperate to make quick repairs. Be wary of unsolicited offers, especially if the contractor asks for a large upfront payment or insists on handling the insurance claim on your behalf. Always verify the contractor's license and check reviews, and reach out to your insurer first to see if they can connect you with a trusted, vetted vendor who can safely tarp your roof, remove debris, or perform emergency repairs. A little diligence upfront can save you from a lot of headaches down the line.
Have questions about your coverage or need to update your homeowners policy? Call your agent today. Or, if you’re in the market for home insurance, visit the Edison Insurance Company website for a quick, easy quote. At Edison, we’re here to help you protect what matters most.
