Risk Management Tip
Prevent home repair insurance claim fraud
Home repair fraudsters will often claim to have been sent by your insurance company to inspect your roof or to check for sinkhole damage or some other structural issue, according to the National Insurance Crime Bureau. They might even promise that the work they do will be covered by your home insurance policy. Unfortunately, some fraudsters intentionally keep homeowners in the dark about the nature, cost and status of their claim. Worse, when these contractors present an inflated claim to an insurance company, you could be sued or face a lien on your property.
Home repair fraud most commonly victimizes senior citizens, first-time homebuyers, women and those who aren’t native English speakers, according to the National Center for the Prevention of Home Improvement Fraud. Homeowners in areas that have just been hit by natural disasters also are popular targets for home repair fraudsters. Such targets are especially vulnerable because they’re feeling stressed, they lack knowledge about repairs or they simply aren’t aware of repair fraud.
Before beginning any home repair project, obtain at least two bids in writing, the Federal Trade Commission (FTC) recommends. The FTC also suggests the following guidelines when dealing with contractors:
- Ask for proof of the contractor’s business license. Jot down the license number.
- Assume that any offers made on a “now or never” basis are fraudulent.
- If your insurance company has issued a check to you for repairs after a disaster, never sign it directly over to a contractor. Instead, arrange for a “certificate of completion” with your bank before issuing payment. The bank then will pay the contractor for each stage of the job after you’ve approved it.
- Never pay contractors in full before or just as a job begins, regardless of how persistent they are. Pay either in installments as you continually inspect and approve the quality of work, or in one lump sum at the end.
- Particularly for large jobs, require that all contractors provide a sworn statement that materials have been fully paid for and that all subcontractors have been paid, to protect yourself from potential recourse if money still is owed on work done to your property.