Avoiding Insurance Fraud After a Natural Disaster

After a natural disaster, it is not uncommon for scam artists to come out of the woodwork. They know home insurance companies are likely to pay out for costs associated with necessary repairs caused by excessive damage to homes–and you will be looking to pay as little as possible of your own money to get the work done.

No one wants to be taken advantage of, but we all know that it is possible if we aren’t well informed of the scams and issues that may arise after a major event such as a natural disaster has occurred. To help you out, let’s take a look at what you could face, as well as how you could avoid problems.

Common Scams and Rip-Offs You May Encounter

There’s no doubt that a scam artist loves a natural disaster. Whether you’ve suffered a hail storm, tornado, hurricane, flood, blizzard, earthquake or even a fire, there’s someone hoping to profit from your misfortune. This is why it’s up to you to protect yourself by knowing some of the scams and issues you could run into:

  • Work and run: After incurring damage to your home, you could pay a contractor to make repairs only to find out that they’ve done a shoddy job (used inferior materials, performed less-than-quality work), taken your money and run. Unfortunately, if they were not legitimate professionals, it could be hard to track them down after you realize their work was sub par.
  • No work and run: Other homeowners have run into the contractors that promise to do their work, but end up taking a portion or all of the homeowner’s money without doing the work at all.
  • Fake insurance: Another issue some homeowners have run into is fake home insurance fraud, where a phony insurance representative will sell the home insurance after the event has occurred and encourage the homeowner to file a claim. Don’t do it. If you were not insured at the time of the natural disaster, you can’t file a claim, so whatever “insurance” this representative is trying to sell is fake.
  • Price gouging: If a major storm has ripped through town, you will probably see a ton of businesses try to run up the price of their services, including home repair work, rental cars, motels and hotels and even groceries and gas. If you feel that you’ve been the victim of price gouging, contact your state’s Division of Consumer Affairs to file a complaint.
  • Identity theft: As with price gouging and fake insurance, some of the fraud you could encounter may come from scammers outside of the home repair business. For instance, if you are due government relief, you may receive a visit from a fraudulent government official asking for the personal information needed to receive your benefits. If you are approached by a supposed official, ask for ID and check their legitimacy with their government office. Or better yet, initiate contact with the appropriate office to receive your benefits yourself.

There are a lot of issues that you could run into after a natural disaster, which is why it’s good to stay on your toes. The good news is that there are ways to avoid becoming a victim when dealing with the various issues that could arise in this situation.

How to Avoid Problems

It’s sometimes tough tell whether a business you’re working with is legitimate. However, if you keep the following tips in mind, it will be a bit easier:

  • Verify identities: This is crucial to ensuring that you don’t get scammed. Whether you approach a business or vice versa, you need to ensure they are a legitimate business and have had no complaints filed against them. In addition to checking identification and searching their business name online for evidence of any scams, also check with the Better Business Bureau to see if complaints have been filed against them.
  • Get multiple estimates: To ensure you’re not the victim of price gouging, get estimates from multiple contractors.
  • Ask for references: If you’re approached by a company that wants to work for you, demand legitimate references that you can verify. Even better, work with a company that comes highly recommended by someone you trust. This way, you will have fewer concerns going into a project.
  • Get all work in writing: Don’t agree to a project with just a handshake. Be sure you get all work in writing before paying a dime. Make sure you can have a copy of the contract to look over and agree to the terms fully before signing. Lastly, make a copy of everything you sign so you don’t have a “he said, she said” argument down the line.
  • Don’t sign incomplete contracts: If you sign a contract with blank spaces, the contractor may fill them in later. Before signing your name on the dotted line, make sure every blank is filled with the appropriate information to avoid accepting prices and terms you do not agree with.
  • Pay when work is finished: A fast talker may try to convince you to pay in full before the work is finished. Don’t finish paying or sign a completion certificate until the work is done and approved by you.

Also, be aware that a contractor can place a lien against your home if you sign on the following statement and then run into an issue later:

“Important Notice: You and your contractor are responsible for meeting the terms and conditions of this contract. If you sign this contract and you fail to meet the terms and conditions of this contract, you may lose your legal ownership rights in your home. KNOW YOUR RIGHTS AND DUTIES UNDER THE LAW.”

If you don’t follow the terms of the contract, you could lose your home, which is why it’s that much more important that you agree to the terms and hold up your end of the bargain.

Another tip to remember is that if you have suffered through a natural disaster, you should know that home insurance doesn’t cover everything. For instance, if you had an earthquake, you need separate earthquake insurance. If you experienced flooding, you need additional flood insurance. The same is true for fire insurance.

By knowing what your home insurance covers, you eliminate the risk of filing a claim for the wrong circumstance, or worse, paying out of pocket for damages because you didn’t have the right coverage.