5 worst home insurance contractor scams

Chris Kissell

Storm season is in full swing. Tornadoes, severe thunderstorms and hurricanes already have wreaked havoc across the United States, and are likely to continue through the summer.

Bad weather damages homes, which brings out scammers. These con artists pose as legitimate contractors in hopes of bilking people out of their hard-earned cash.

In fact, unsatisfactory home improvement and construction work ranks second on the list of top U.S. consumer complaints, according to the Consumer Federation of America.

The same study also found that encounters with unlicensed contractors are among the fastest-growing consumer complaints.

Most contractors are honest, says James Quiggle, spokesman for the Coalition Against Insurance Fraud. Still, homeowners must remain on their guard so they do not fall victim to unscrupulous repair schemes.

The coalition has identified five scams as being especially typical. Following is a list, along with tips for protecting yourself.

Scam No. 1: Demands for large prepayment.

A crooked contractor may ask a homeowner for a large down payment before beginning work.

Once the homeowner hands over the money, the contractor disappears, never to be heard from again.

Quiggle says it’s reasonable for contractors to request a modest down payment. The contractor typically will use the money to buy materials, and the payment also acts as earnest money.

However, Quiggle urges you to be suspicious whenever the requested down payment exceeds 20 percent of the projected bill total.

And if the requested amount is 50 percent, or even 75 percent?

“The red flags of possible fraud are fluttering,” Quiggle says.

In another version of this con, the contractor may skip asking for a large down payment, but instead will charge a fee before giving the homeowner a bid.

“That’s ridiculous,” Quiggle says. “Any reputable contractor will bid free of charge.”

Scam No. 2: Use of cheap materials during construction.

Some shady contractors perform the repair, but use such shoddy materials that the work must be done again.

For example, the contractor may use a cheaper wood that is not properly treated to handle the local weather, or that’s simply not suited for the repair job.

In other cases, the crooked contractor may make repairs that look good cosmetically, but don’t get the job done.

“A branch might gouge a hole in the roof, and the contractor only does cosmetic repairs that don’t use enough materials to fully repair the roof,” Quiggle says.

When the homeowner discovers the shoddy work later, it typically needs to be redone — at the homeowner’s expense.

“Too much is at stake to jeopardize urgent repairs with a contractor who’s acting suspiciously,” Quiggle says.

Scam No. 3: Creating phony damage during an inspection.

Sometimes, an unprincipled contractor may try to create a demand for work by manufacturing storm damage.

Carole Walker, executive director of the Rocky Mountain Insurance Information Association, cites the example of creating phony hail damage on a roof.

“Hail season is boom time for roofing contractor scams,” she says.

For example, the contractor may covertly use a screwdriver or other tool to create phony “hail damage” marks, before breaking the bad news to the homeowner.

Fortunately, this is one scam that’s often discovered.

“Trained insurance adjusters can easily spot the difference between Mother Nature’s handiwork and a scammer who’s taken a hammer to a roof,” Walker says.

So, beware if you have a high deductible, and the contractor offers to fix damage at a cut-rate price so long as you skip the insurance company and pay in cash.

Scam No. 4: Intentionally worsening already-existing damage.

While some contractors create phony damage wholesale, others simply inflate the amount of damage that already is present in hopes of padding the repair bill.

For example, contractors may take already existing holes in a roof and enlarge them. In other cases, a contractor may claim to have done work to repair damage that never existed.

“People just want to put their lives back together,” Quiggle says. “Unlicensed and incompetent contractors descend on the damage area and prey upon a homeowner’s anxiety.”

Scam No. 5: Offering to pay your insurance deductible.

Some disreputable contractors may offer to pay a homeowner’s deductible in an attempt to win the bid. Homeowners who receive this offer should be immediately suspicious.

“Why would a legitimate contractor need to basically bribe a consumer to do business?” Quiggle asks. “A legitimate contractor should play it straight and make a straightforward bid.”

Michal Brower, a spokeswoman for State Farm, says you also should be wary of a contractor who claims to have a relationship with your insurer.

“If anyone visits your home without an appointment and professes to represent your insurer, ask for identification,” Brower says. “Contact your insurer to confirm before allowing access.”

How to prevent a scam

To prevent becoming a victim of any of these scams, follow these tips:

1. Use common sense.

For example, demand to see the contractor’s license and other documents.

“Ask to see certificates of insurance to be sure both liability and workers’ compensation insurance coverage is carried, and are in force,” Brower says.

2. Check your contractor’s legitimate.

One way to find a reputable professional is to contact your local Better Business Bureau, or an organization such as the National Roofing Contractors Association, Brower says.

Quiggle says legitimate contractors always should present themselves as professionals.

“A contractor’s truck should have a company name, logo, phone or other identifiers,” he says. “If a contractor pulls up in a battered truck with no identifiers, look for someone else.”

3. Don’t make an oral agreement.

Avoid contractors who try to operate with an oral agreement, or who scrawl details on a paper or envelope instead of presenting formal paperwork.

“Insist on a contract that clearly spells out the price, scope of work, completion schedule and other details,” Quiggle says.

4. Consult your insurance agent.

“Your best bet is to coordinate repairs closely with the insurer,” Quiggle says. “Make sure that the insurer’s field rep or adjuster is part of the repair process and is regularly informed about all steps. This scrutiny could head off a swindle before it gets going.”

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