Arson Not the Answer in Foreclosure Cases

The fact that there is little or no financial gain in setting a home on fire may explain why investigators are seeing so few cases of suspected arson involving houses threatened with foreclosure, according to the Insurance Information Network of California.

When a home is destroyed by fire, insurance will cover the replacement cost of the home. However, whether the fire is a result of arson or other means, the lender will be named on the insurance settlement check.

In 2007, California recorded 481,392 notices of default. However, while the number of foreclosures has skyrocketed, potential foreclosure-related arsons have not followed suit. Only 14 arsons potentially related to foreclosure were reported in 2007 by the California Department of Insurance.

The consequences of committing insurance fraud and arson, both felonies, are more dire than the consequences defaulting on a mortgage.

A conviction of insurance fraud or arson will result in jail time. Insurance fraud alone can result in up to five years jail time and penalty fees up to $50,000, and the penalty for arson could result in jail time from 5-to-20 years.