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How To Avoid Contractor Repair Rip-Offs

By Barbara Marquand on May 23rd, 2010
Homeowners Insurance

After a natural disaster rips through your town, the last thing you need is for a swindler to wreak financial havoc as you try to get your life back together. But that's exactly what happens to a troubling number of homeowners. Still suffering from shock and anxious to get their homes repaired, many trust crooked contractors, who do shoddy work, or, even worse, charge money upfront and then disappear.

Don't let this happen to you if disaster strikes your neighborhood. Learn to spot signs that a contractor doesn't have your best interests at heart, and do your homework before you hire anyone to repair your home.

Scams blossom in spring

Seasonal severe weather, such as hail storms, hurricanes and tornadoes, bring scam artists out of the woodwork. They descend on hard-hit areas and go door-to-door offering services. Often swindlers ask for money upfront and either pocket the cash and never return, or buy cheap materials, take shortcuts and do poor work that is not up to code to boost profits.

Corrupt roofers even create damage to boost business, says Frank Scafidi, spokesperson of the National Insurance Crime Bureau in Des Plaines, Ill. How? After a hailstorm pounds a neighborhood, contractors knock on doors telling homeowners they can get free roofs if their homes suffered damage and they carry home insurance. Once contractors gain a homeowner's confidence, they offer to go on the roof to take a quick look.

Certainly hail can cause roof damage, which is covered under a homeowner's insurance policy. But if shady roofers do not find significant damage, they simply create it themselves, using coins to gouge dents into asphalt shingles. Unscrupulous roofers then snap pictures, show the appalling "hail damage" to the homeowner, and offer their services to replace the roof. According to Scafidi, elderly homeowners who are too frail to survey the damage themselves are particularly at risk.

In some cases, scam artists work solo or with a couple of buddies, or they might simply be dishonest employees, says Scafidi. "The companies might be legitimate, but the people they hire may not be altar boys."

These scams have been going on for a long time, but they weren't on the radar until the last several years, Scafidi states. The bureau is hearing more reports of fraud from member insurance companies, but, he says, it's hard to say whether the increase stems from a rise in fraud or closer examination of claims by insurers.

The Insurance Information Institute estimates property/casualty insurers lose about $30 billion a year to all types of fraud, including scams by contractors.

Not all the people who go door to door offering services after a disaster are crooks. Some are legitimate contractors earning an honest living who really do want to help. How do you tell the good guys from the bad? Follow these tips from the National Insurance Crime Bureau:

  • Don't rush a decision: "Scam artists know there's a lot of confusion and emotion after a disaster, and that works in their favor," says Scafidi. "There's also a sense of urgency. You might feel, 'If I don't get my work done now, it might be several weeks before I can get my house repaired.'" But if you hire a crook, you'll lose money and be even further behind. Don't let anyone pressure you. The time you spend to do your homework before hiring may pay dividends later.
  • Check out the contractor: Make sure the contractor is licensed and bonded. Get the contractor's license number and check with your state's contractor board to see if any complaints have been filed. Ask for references, and call them. Also get the driver's license number and vehicle license plate number of the person who contacts you. A good contractor is happy to answer questions and provide references. End the discussion with anyone who hesitates to provide basic information.
  • Get at least two estimates: Don't hire the first guy who shows up at your door, even if his references check out. Get at least one or two more estimates to make sure you get a good deal.
  • Trust your gut: "Keep your antennae up, and if anything strikes you as a little weird, step back and take a breath," Scafidi says. Bottom line: Don't hire anyone who makes you feel even the slightest bit uncomfortable.
  • Get everything in writing: Spell out the details in a written contract, including the work to be done, cost, payment and work schedules, guarantees and other expectations. Never sign a contract with blanks, which could be filled in with unacceptable terms later.
  • Don't sign until the work is done: Never sign a completion certificate or pay a contractor in full until the work is finished and an inspection shows that the reconstruction is up to current building code.
  • Mind the insurance details: Review and understand all the documents sent to your insurance company, and don't let the contractor interpret the insurance policy language. Don't hesitate to call your insurance company with questions or concerns, and be suspicious of any contractor who tries to discourage you from contacting your insurance carrier.

Finally, if you think someone is trying to pull a fast one, on you or the insurance company, call your carrier or the National Insurance Crime Bureau Hotline at 1-800-TEL-NICB (1-800-835-6422). You an also text your information to TIP411, keyword "FRAUD" and remain anonymous.

Remember, insurance companies aren't the only losers when it comes to property insurance fraud. Even if you're not victimized personally, you pay for the crime in the form of higher home insurance rates.

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