Even the ‘good apples’ can sometimes waiver in such a situation by reasoning, ‘How will the insurance company know that I didn’t have an expensive, big screen television?’ Well, insurance industry experts say that the insurance company will know and that a misrepresentation of a claim could mean big trouble for unsuspecting policyholders.

Dave Peterson, a 30 year insurance industry and fire insurance expert, explains how dangerous this practice can be. “The law is that the insurance company can deny the claim in its entirety if the insured misrepresents something during the processing of the claim. What the insureds are going to find when there’s a fire loss is that the insurance company will ask - was it arson? They will generally start an arson investigation and assign the claim to the special investigation unit and have them undertake an investigation. That’s the first effort to not paying the claim.

The second effort to not paying the claim will be to look at the application that the insured filled out to see if they misrepresented anything in the application. Effort number three is that they want all this detail in the personal property information. They throw it back on the insured by saying, ‘You have to fill all this stuff out to get your personal property claim paid,’ and so what they’re really doing is hoping that the insured will misrepresent something so that they can glom onto that and deny the claim in its entirety. One misrepresentation is enough.”

Going through the ashes

Most insurers don’t realize the lengths that insurers will go to when suspecting fraud. Bob Scott, a partner with the Advocate Law Group, has over 30 years of experience in this area and shared his thoughts on the issue. “Let me give you a good example of how that happens. Your insurance company asks you how many televisions you had in your house and you say ‘five’. They send an arson investigator in and they go through the ashes – and I’m talking about a house that has burned to the ground. They go through the ashes with a rake and they find the metal frames of four TVs instead of five. You’re going to lose your entire claim.

It is a distinct threat and so you have to be very careful. Don’t ask for more than you can absolutely confirm. If you have to err, err conservatively and say, ‘I’m not sure. I may have had three. I can’t remember if I had two or three.’”

Be smart

The smartest thing a policyholder can do is to be conservative and don’t risk padding the claim. Peterson explained that making a video of your home’s contents can avoid suspicion and make the process easier. “For example, I must have about 25 Buddhas in a collection at my home. If my house burns down and I have a video of the Buddhas, the insurance company will ask me what they were worth. Clearly, I don’t know offhand because I’ve been purchasing them for many years and my receipts have burned in the fire. I can tell the insurance company to figure it out by giving them the video.

Many consumers don’t know this, but insurers have facilities that they can use to price these things so you just put the onus back on them, rather than to say, ‘This Buddha cost $1,000. This one cost $750. This one cost $400 and I bought this in San Francisco ten years ago.’ You just open yourself up to claims of insurance fraud. In other words, talk to your insurance agent and agree on the value. Put it on a separate stated segment of your policy that lists all these individual things and lists the value. I would do it with mink coats. I would do it with diamond rings. I would do it with jewelry and I would do it with vases, paintings and fine art – all those things that are expensive, let’s say more than $5,000.00 a piece.” Although you’ll pay an extra premium for that, there can be no dispute as to the items, and values, for which you’re insured.

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