Across the country property and business owners have been overwhelmed by damage caused by tornados, fire, flood, and other disasters. For many, this is the first time they have experienced such loss, and they become targets of insurance fraud when questionable contractors show-up in damaged communities offering to clean and repair the damage, handle the insurance claim, and other services.
A dishonest contractor may collect payment without completing the work, they may use inferior materials, or they may perform work that is not up to code. It’s not uncommon for a fraudster to convince a property owner that a large deposit is required before work can begin. Often, the work is started, but not completed before the crooks disappear. Further, a contractor that manipulates the price to cover the deductible or extra work not caused by the disaster is committing insurance fraud.
Signs of a scam How can you tell if a contractor might not be reputable? The Federal Trade Commission warns that you may not want to do business with someone who:
Shows up without an appointment to solicit business
Just happens to have materials left over from a previous job
Pressures you for an immediate decision
Only accepts cash, asks you to pay everything up-front, or suggests you borrow money from a lender the contractor knows
Asks you to get the required building permits
Tells you your job will be a "demonstration” or offers a lifetime warranty or long-term guarantee
Doesn’t list a business number in the local telephone directory
Before you hire a contractor If you’ve been a victim of a disaster, don’t rush into repairs or rebuilding without contacting your insurance agent, securing your property from further damage/loss, and documenting the damage. The National Insurance Crime Bureau recommends these tips before you act on a contractor’s offer for services:
Work with your insurance company to get an accurate damage estimate and references for a reliable contractor
Work only with licensed and insured contractors
Get an estimate from more than one contractor
Don’t be pushed or pressured into signing a contract right away
Get everything in writing, including cost, work to be done, time schedule, guarantees and payment schedule
Require references and check them out.
Ask to see the salesperson’s driver’s license and write down the number; also write down the salesperson’s license plate number.
Never sign a contract with any blanks not filled in.
Never pay a contractor in full or sign a completion certificate until the work is completed.
There are many honest, reputable contractors that specialize in disaster restoration. Work with your insurance agent, do your research, and get everything in writing. Qualified contractors are licensed, have the tools and materials required for the job, and have skilled personnel trained in mitigation and restoration. Emotions run high following a disaster – and that’s understandable. Use caution during this time. Because awareness is the first step in prevention, be aware of the potential fraud that could occur following a disaster. Talk to your employees about how scams happen and how to spot them.
While every effort has been taken in compiling this information to ensure that its contents are totally accurate, neither the publisher nor the author can accept liability for any inaccuracies or change circumstances of any information herein or for the consequences of any reliance placed upon it. This publication is distributed on the understanding that the publisher is not engaged in rendering legal, accounting, or other professional advice or services. Readers should always seek professional advice before entering into any commitments.