Arson For Profit: Insurance Fraud Gone Wrong

Burning your house down for insurance money is a criminal act that can have devastating consequences. While it may be tempting to see insurance payouts as a financial windfall, the reality is that insurance policies are designed to help policyholders recover from genuine losses, not profit from them. In the event of a house fire, homeowners' insurance policies typically cover the cost of replacing lost personal items, rebuilding or repairing the home, and covering additional living expenses such as temporary housing, meals, and emergency items. However, insurance companies will investigate claims thoroughly, and arson is not covered under any policy. If you are considering burning your house down for insurance money, it is important to understand the severe legal and financial repercussions of such an action, including the likelihood of a denied claim, bad faith lawsuit, or even criminal charges.

Arson will void your insurance claim

Arson is a crime and will void your insurance claim. When you take out insurance on your home, you will likely have fire insurance included. However, one standard provision of fire insurance policies is the exclusion of fires caused by arson. This means that when your property is damaged due to arson, you will not be entitled to collect any proceeds under your policy. This is understandable because, as explained, arson is a crime and no one should benefit from doing something illegal.

When you take out home insurance and include coverage for damages caused by fire, your policy will likely include an arson clause that states the company does not cover losses caused by arson. When an insurance investigator arrives to inspect your home and take down a report, it is wise to cooperate as much as possible and answer all their questions truthfully. Be brief with your replies and avoid asking questions about recovering any damages.

If your insurance company denies your claim on the basis of arson, this is a common tactic used by insurance companies to avoid paying insurance claims. The company must prove its claim with solid facts and proof, not just speculation and suspicion. If you believe the insurance company is acting in bad faith, you can engage the services of another fire investigator to conduct an independent investigation and present their testimony in court if needed.

In some cases, your home may be damaged by arson started at a neighbour's home. In this case, you may still file a claim with your insurance company, and they may seek to recover the loss by suing the neighbour's insurance company. If your insurance company only covers partial losses, you can also sue the neighbour directly to recover the rest.

You can claim for temporary housing

If your house burns down, you will likely need to find temporary housing. It will probably be unsafe, if not impossible, to stay in your home after a fire. Your homeowners' insurance policy may include coverage for temporary housing that sustains your current standard of living. However, each insurance policy is unique, so it is essential to review your policy and consult with your insurance provider for precise details. Some insurance companies may provide upfront funds to cover immediate needs, such as temporary housing or clothing.

After a fire, you should notify your insurance company about the loss of your home to begin the claims process. They will guide you through the necessary steps and documentation required. An insurance adjuster will then visit your home to complete a walk-through and document the extent of the damage. They will determine the most cost-effective way to repair or replace your home and lost items. It is important to be prepared and present for the insurance adjuster's walk-through. Take photos, document the damage, and keep a detailed record of any specialty items lost.

The amount of money the insurance company will pay out depends on the type of homeowner's policy you purchased. The most common and advised policy is a replacement cost policy, which aims to put you back in the same position you were in before the fire. The company will cover the cost of repairing or rebuilding your home up to the replacement cost value, which is determined by factors such as the age, size, shape, and finishes of your home. An actual cash value policy will calculate the percentage of your home lost or damaged and determine the payout amount based on the loss percentage minus depreciation. However, this type of policy is usually not enough to cover the cost of repairing or replacing a home.

When choosing temporary housing, you may want to look at websites like FurnishedFinder.com and corporate housing sites. Your insurance company may also provide the name of a company that can help find temporary housing. Be sure to save all receipts for any costs you incur for housing or other needs stemming from your loss. Keep in mind that homeowners are still responsible for making mortgage payments, even if their home is lost. However, in some cases, mortgage lenders may temporarily suspend payments while you rebuild or find alternative housing.

You may need to fight your insurance company for a payout

If you are the victim of arson and your house has burned down, your insurance company will likely turn down your claim, even if the fire was started by an unknown third party. Home insurance does not typically cover fires started intentionally. In the event of a fire, the first thing to do is to call your insurance agent or broker to report the incident and begin the claims process. An insurance investigator will then visit your home to inspect and document the damage. It is important to cooperate with the investigator as much as possible and answer their questions truthfully.

After the investigator's visit, the insurance company will determine the payout amount, which is dependent on the type of homeowner's policy you purchased. If you believe the insurance company has not paid enough to cover your damages or has unfairly denied your claim, you have the right to appeal their decision. You can ask the company to reconsider and conduct a full and fair review of its decision. If you are still unsatisfied, you may need to take further steps to challenge their decision.

One option is to hire a public insurance adjuster if you disagree with the number or type of damages listed by the insurance company's adjuster. Public adjusters charge fees for their services, so it is important to understand the costs before hiring one. Another option is to pursue an appraisal process, where you and the company each hire separate damage appraisers who then choose a third appraiser as an umpire. The appraisers review your claim, and the umpire makes the final decision, which is binding on both parties.

If you are still unable to resolve the dispute, you may have the right to sue the insurance company in a court of law or seek arbitration. Arbitration involves a third party overseeing the dispute and making a decision, which can be binding or unbinding. If the decision is unbinding, you can take the dispute to court. Litigation is not common in insurance disputes as settling is usually cheaper and less time-consuming. It is important to consider the costs of challenging an insurance company's decision compared to the potential payout.

You'll need to provide evidence of your possessions

If your house burns down, your insurance policy is designed to help you navigate through this challenging time and support you financially. To receive compensation for your losses, you will need to provide evidence of your possessions to the insurance company. Here are some detailed steps to follow:

Document and List Your Possessions:

Start by creating a comprehensive list of all the items that were lost or damaged in the fire. This list should be as detailed as possible, including the name, description, and approximate value of each item. It is essential to be thorough and include everything, from furniture and appliances to clothing, electronics, and personal belongings. You can use receipts, photographs, and other documentation to help you recall and value each item accurately.

Gather Receipts and Proofs of Purchase:

Receipts are one of the most widely accepted forms of proof of ownership. Go through your records and gather all the receipts related to the lost or damaged items. If you cannot find a receipt for a particular item, don't worry; there are other ways to prove ownership.

Use Credit Card Statements or Bills:

In the absence of receipts, credit card statements or bills can serve as alternative proof of ownership. These documents can show that you purchased certain items, even if you no longer have the original receipts. Contact your credit card company or bank to obtain copies of relevant statements if needed.

Provide Photographs and Other Visual Evidence:

Insurers may also accept photographs as proof of ownership. If you have photos of yourself or your family members using or wearing the items in question, include them in your evidence. Visual evidence can be powerful in supporting your claim.

Obtain a Notarized Oath:

Some insurance companies may accept a notarized oath or affidavit as proof of ownership. This document will include your attestation that you owned the items in question. Consult with your insurance provider to see if this is an acceptable form of evidence.

Remember, the goal is to provide as much evidence as possible to support your claim. By presenting a detailed list of possessions, along with various forms of proof of ownership, you can strengthen your case and increase the likelihood of receiving fair compensation from your insurance company.

You can claim for the cost of replacing possessions

Committing arson to destroy your own property is a crime and is not recommended. If you deliberately burn your house down for insurance money, your insurance company will likely reject your claim. Home insurance does not cover fires started on purpose, and your policy will likely include an arson clause that states the company does not cover losses caused by such actions.

However, if you still choose to go ahead with this plan, you should know that there are two ways of insuring your personal possessions: replacement cost policies and actual cash value policies. A replacement cost policy will pay the dollar amount needed to replace a damaged item with one of similar kind and quality without deductions for depreciation. This type of policy is designed to put you back in the same position you were in before the loss. To determine the replacement cost value of your home, factors such as the age, size, shape, and finishes of your home are considered. On the other hand, an actual cash value policy pays the amount needed to replace the item, minus depreciation. For example, if a fire destroyed a five-year-old TV set, an insurance company with an actual cash value policy would only pay a percentage of the cost of a new TV set because the TV had been used for five years and would be worth less than a brand new one. Generally, an actual cash value payout will not be enough to cover the replacement cost of a home in the event of a loss, which is why replacement cost policies are more popular among homeowners.

If you have a replacement cost policy, you will receive the actual cash value of your damaged items at the time of settlement. To recover the replacement cost, you will need an accurate inventory that includes the cost at purchase, date of purchase, and a detailed description of the property, including images whenever possible. It is important to be prepared and present for the insurance adjuster's walk-through, taking photos, documenting damage, and keeping a detailed record of any specialty items lost. The adjuster will determine the most cost-effective way to complete the repair or replacement of your home and lost items. For some personal items, the adjuster may deem it more cost-effective to replace an item that experienced smoke damage rather than pay for cleaning and restoration of an item. However, if there are specific items that hold personal value or are family heirlooms that cannot be replaced, it is important to mention this to the adjuster.

In addition to the cost of replacing possessions, your insurance policy may also cover the costs of additional living expenses such as hotel or apartment rentals, meals, and emergency items.

Frequently asked questions