Don’t get ripped off after a disaster
From wildfires in California to hurricanes in Florida and Texas, disasters rattle the American landscape each year. In addition to causing billions in damage, natural disasters may subject homeowners to opportunists hoping to take advantage of confusing and turbulent times.
Contractor fraud is rampant following a natural catastrophe. Though some states have passed laws aimed to protect homeowners from contractor fraud, such as prohibiting rebates and allowing for contract termination, the fact remains that homeowners must be vigilant to avoid potential scams.
What contractor fraud looks like
Not every professional who goes door-to-door offering to clean up or make repairs after a catastrophe is out to scam you. However, this is a common tactic by folks who might try to defraud victims after a major, community-wide disaster.
Fraudulent service providers may try to:
- Get upfront payment for a job and never show up for it.
- Begin a job but not complete it.
- Use subpar materials or deliver shoddy work to pocket more profit.
That’s why it’s so important to contact your insurance company before you begin any construction or repair work on your home following a disaster. They can guide you on next steps and make sure you work with trusted contractors.
Assignment of benefit scams in Florida
One of the most common forms of contractor fraud in Florida is an assignment of benefit (AOB) scam. In this scam, a homeowner signs a document assigning benefits from an insurance policy to a contractor. This allows the contractor to deal directly with the homeowner’s insurance company to:
- File claims.
- Make repair decisions.
- Receive claim payouts.
Essentially, signing an AOB may mean an unscrupulous contractor can claim benefits for work that was never actually completed.
Thankfully, AOB scams have gotten a lot of attention and Florida’s Senate Bill 2A has taken aim at the problem in an effort to reduce the scam’s frequency and effect.
Tips to avoid post-disaster contractor fraud
In addition to calling your insurance company before you hire a contractor, as a general rule, if you didn’t request the work, don’t accept it.
These pointers can help you find a reputable contractor when you are ready to get repairs on your home underway.
DO:
- Get more than one estimate so you can compare rates and timelines.
- Get all promised work in writing, including all repairs, cost, timeline, payment schedules, and work warranties.
- Ask for references, read reviews of the contractor’s work, and look up their business on the Better Business Bureau or Angie’s List.
- Check the contractor’s driver’s license and write down their license number.
- Ask for the contractor’s insurance certificate and licensing.
- Review all documents sent from the contractor to your insurance provider.
DON’T:
- Sign an incomplete contract or a work order with blanks.
- Pay a contractor in full before work is finished.
- Sign a completion certificate before the work is complete and inspected for code compliance.
- Hire a contractor because they pressured you.
- Let a contractor decide what your policy covers.
- Let a contractor dissuade you from talking to your insurer.
Why homeowners need to avoid contractor fraud
You might be asking yourself, “So what? Who cares? Isn’t this the insurance company’s problem?” Oh, if wishing made it so.
Contractor fraud has significant effects on homeowners who fall victim to the scam. These homeowners end up with poor claims histories that can lead to homeowners seeing drastic rate increases – or even difficulty getting coverage at all. In fact, AOB benefit scams in Florida are one major reason why rates are continuing to climb so fast in that state.
Plus, if an insurance company finds that a homeowner was in any way complicit with the fraud – or had reason to suspect one was being committed – the homeowner may face legal consequences as well.
Insurance fraud also has significant impacts on the broader economy as well. When one homeowner in a particular area falls victim to a scam, it can increase the cost of coverage for others in their area. Depending on the size and scale of the fraud, these effects may be amplified as local businesses and property values are impacted.
How to report insurance fraud
If you think you’ve been solicited by an unlicensed contractor or adjuster or have been asked to fabricate an insurance claim, contact your insurance company immediately. You can also call the NICB hotline at 1-800-835-6422 or text your information and FRAUD: to TIP411.
