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Pad a home insurance claim?

By Jay MacDonald · Bankrate.com
Tuesday, March 26, 2013
Posted: 6 am ET

Imagine this all-too-common scenario: Your home is burglarized, and because the stolen items weren't exactly Picassos, most of the cost to replace them would come out of your pocket due to the $500 or $1,000 deductible on your home insurance policy.

Then, it occurs to you, that maybe if you pad your claim, say by adding a "missing" $500 or $1,000 TV or laptop, you could "help" your insurance work the way it was intended, i.e., to make you whole again following a loss.

Would you do it? Or would you balk?

1 in 4 would pad

A new study by the Insurance Research Council, "Insurance Fraud: A Public View," finds that nearly a quarter of us (24 percent) would pad our claim by a small amount to erase the deductible and thus shift the replacement cost onto our insurer. In addition, 18 percent of us think it would be perfectly OK to pad a claim to make up for all those years of premiums we paid without ever receiving a dime back.

Surprisingly, our scruples seem to have improved despite the recent lean times. Back in 2002, a third of all survey respondents (33 percent) would have added that fictitious TV or laptop to their claim, and today's 18 percent premium-payback club is the smallest since the IRC started the survey in 1981.

I pad, you pad

Who is most likely to pad a home insurance claim? The survey suggests that men between 18 and 34 have the least trouble with the practice (23 percent), while their female contemporaries (8 percent) and older men (5 percent) would be least likely to pad a claim.

The deductible remains the great conundrum of the insurance world. On the one hand, it's one of the industry's strongest sales tools because it can magically adjust premiums downward to close the deal. On the other, it seems terribly egregious when it protects a large insurer from paying a small claim, even if most of us see the merit of insurers using deductibles to discourage nickel-and-diming, thus keeping our rates affordable.

Deductibles falling out of favor?

While deductibles remain sacrosanct in the homeowners insurance realm, some auto insurance companies, notably Allstate, have recently been capitalizing on this love-hate dichotomy by marketing "vanishing deductible" programs that reduce your deductible for each claim-free year, ostensibly as a loyalty reward.

Never mind that some carriers tack on a nominal fee to pull off this sleight of hand. The point is that consumers respond to the idea that they can enjoy their deductible cake (the premium-savings part) without having to eat it (pay for their own losses) later.

Follow me on Twitter: @omnisaurus

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Jay MacDonald is a Bankrate contributing editor and co-author of "Future Millionaires' Guidebook," an e-book by Bankrate editors and reporters.

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