The woman, identified only as L. T. N., checked into a Hanoi hospital in May with one third of her left foot and one third of her left hand severed, but doctors told her they could not reattach the limbs.
She later told police she was struck by a train as she walked on the tracks and was rescued by her friend Doan Van D., according to Tuoi Tre’s English edition.
The 30-year-old submitted a claim to her insurance company for 3.5 billion dong ($157,000), a huge sum in Vietnam where the average annual income is $2,100.
But authorities smelled a fraud.
“N. hired D. to cut her hand and foot, then continued to have him report false information to the police,” said Bac Tu Liem police chief Nguyen Thanh Tung said, according to the newspaper.
Hanoi police declined to comment to AFP about the case, but reports said the woman offered her friend around $2,000 to perform the bloody deed.
“The greatest shame is that N., instead of claiming the money, has suffered a huge loss by losing both her hand and foot,” Tung was quoted as saying.
The woman is being treated for the wounds, the newspaper added, and police are looking into whether she should be charged with conspiracy to steal assets.
“Her case sends a warning that people should not attempt insurance fraud at the expense of their own health,” said Tung, adding it was the first case of the kind he had ever seen in Vietnam.
It was not clear if D. was promised a cut of the insurance payout before the scheme unravelled.