Last year was a historic year in the U.S., with 28 billion-dollar weather and climate events causing more than $1 billion in damages each. In the 1980s, the average time between billion-dollar events was 82 days. By 2023, that will be just 12 days.
These catastrophes leave millions of Americans struggling to recover and rebuild their lives, and when repairs or renovations are needed, the process can often be overwhelming. Unfortunately, unreputable contractors often appear in the wake of these disasters, preying on desperation with high-pressure tactics and promises of quick repairs, leaving homeowners financially and emotionally drained.
Contractor fraud is a pervasive problem that not only erodes community trust but also causes enormous financial and emotional harm to families across America. Fraudulent contractors exploit the vulnerabilities of unsuspecting homeowners by promising renovation, repair, or construction projects, then leaving a trail of broken promises, shoddy work, and dwindling savings.
This type of fraud not only affects individual homeowners, but also impacts insurance rates across the industry, costing Americans billions of dollars each year.
To address this growing problem, the National Insurance Crime Bureau has partnered with government agencies and member insurance companies to educate homeowners and businesses on how to avoid becoming victims of fraudulent contractors after a natural disaster as part of the recently concluded annual Contractor Fraud Awareness Week.
Contractor fraud is a crime that lurks in the shadows. Armed with knowledge, vigilance, and a healthy dose of skepticism, we can protect our homes and our hard-earned money. Fortunately, there are important steps all homeowners can take to protect themselves from contractor scams.
- Beware of hard sales: Legitimate contractors understand the value of an informed decision. Contractors who demand an immediate decision or offer a “limited time” discount may be using intimidation tactics.
- Do your research: Don’t hire the first contractor you meet. Ask for referrals from friends, family and neighbors. Check licenses and insurance with your state’s licensing board. Using tools like the Better Business Bureau can reveal a contractor’s complaint history.
- Requesting multiple bids: Don’t settle for just one quote: Get bids from at least three qualified contractors with a detailed breakdown of costs and materials.
- Get a signed contract: If a dispute arises, verbal agreements are worthless. All details must be clearly stated in a signed contract, including the scope of work, materials list, payment schedule, completion schedule, warranty information, etc.
- Please note the prepayment: If a contractor asks for a large amount up front, that’s a red flag. Consider a reasonable down payment and progress payments tied to completed milestones. Don’t pay in full until the project is completed to your satisfaction.
- Look out for warning signs and trust your instincts: Unethical contractors often show obvious signs. Be wary of contractors who don’t have a fixed address, submit unusually low bids, or pressure you into taking out financing. Finally, trust your instincts. If something doesn’t feel right, it probably isn’t.
- Contact your insurance company: Contact your insurance company before hiring any contractors, especially after a disaster. They may have a list of pre-approved contractors or can provide guidance. Also, understand your insurance coverage for repairs and replacements.
- Learn about the project: Learn about the specific project you’re working on. With a basic understanding, you’ll be able to ask informed questions and vet proposed solutions. Resources such as your local building department can provide valuable information about permits and regulations.
- When in doubt, walk away: Don’t be pressured into signing a contract you don’t agree with. Reputable contractors will respect your right to due diligence. Don’t hesitate to break the contract and look for a more reliable professional.
- Report a scam: If you suspect a contractor is committing fraud, report it to your state licensing board, the BBB, or law enforcement. You can also contact the NICB toll-free at 800.835.642 to report fraudulent activity.
Homeownership is often seen as a cornerstone of the American Dream, and taking steps to prevent contractor fraud can help keep it from becoming an American nightmare.
David J. Grau is president and CEO of the National Insurance Crime Bureau, a nonprofit organization dedicated to combating and preventing insurance crimes. He is a former Under Secretary for Intelligence and Analysis at the Department of Homeland Security.
