How Insurance Contractor Scams Work Infographic
Tips to Avoid Being the Next Victim
Top 4 Common Home Insurance Contractor Scams
Home insurance contractor scams come in different forms. The most common scams include:
Use of Cheap Construction Materials: The contractor uses cheap construction materials while charging the insurer full price for repairs. You receive low-quality repairs, and the contractor makes a fortune.
Fake Damage During Inspection: A contractor may offer to inspect your home after a loss, only to invent fake damage during that inspection. Some contractors use screwdrivers to covertly damage your roof after a hailstorm, for example, to convince you to make a claim.
Unlicensed Contractors After Major Disasters: After a major disaster, contractors may descend on a region to make quick money. They go door-to-door to get business. These contractors may be unlicensed in the state.
Take the Money and Run: Some contractors demand a large prepayment from the homeowner before beginning work, only to disappear with the money.
Top 7 Tips for Avoiding Scams
Insurance contractor scams can be tricky. Fortunately, you can avoid scams with basic strategies.
- Get a signed contract
- Check license and insurance
- Avoid paying upfront
- Get a written estimate
- Contact your insurer to inspect the damage
- Get multiple estimates
- Hire a public adjuster to expertly handle the entire claim
Signs of a Home Insurance Contractor Scam
Watch for warning signs of a home insurance contractor scam, including:
- Demanding a large prepayment or money upfront.
- Offering to pay your deductible in exchange for taking over the claim.
- Inability to provide license or insurance information upfront.
- Pressuring homeowners to make a claim, especially after a recent major disaster.
- Arriving at your property unannounced after a loss.
- Inability to provide references.
- Lack of a detailed estimate (like a single lump sum estimate with no breakdowns).
What If the Scam Already Happened?
If you’ve already been scammed, then take action today to avoid further losses.
- Contact a Public Adjuster or Attorney: Public adjusters and insurance attorneys specialize in insurance claim disputes and insurance policy coverage. They’ll know the appropriate steps to take.
- Contact Your Insurance: Call your insurance agent or your insurance company to report the fraud. Your insurer may assign its Special Investigations Unit (SIU) to your case.
- Contact Your State’s Department of Insurance: Each state has a Department of Insurance to handle insurance fraud claims. Report the incident to the appropriate authorities.
- Call the Police: If a contractor is going around your neighborhood scamming people, then consider contacting the police. It may prevent others from becoming victims.
Cost of Insurance Contractor Scams
Each year, insurance companies and policyholders lose over $40 billion to insurance fraud.
National Average Cost: $5,300
Average Range: $2,000 to $13,000
Minimum Cost: $1,000
Maximum Cost: $20,000+