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7 Ways to Avoid Getting Caught in a Home Repair Insurance Scam

by Brooke Gold Hasson | Mar 04, 2016
A contractor laying tile inside a home

Filing a claim after a loss can be stressful. To avoid the hassle of having to hire a restoration contractor and coordinate repairs, many Florida homeowners seek out the help of a public adjuster. Public adjusters are insurance claims specialists who work independently from the homeowner’s insurance company, and assist in managing the repair process.

Assignment of Benefits Abuse… A Growing Problem for Florida Homeowners

While most public adjusters and restoration contractors are trustworthy, we’ve seen a significant increase in Assignment of Benefits abuse cases over recent years—and it is costing homeowners throughout the state of Florida.

Assignment of Benefits abuse is a type of home repair insurance scam in which shady contractors team up with public adjusters and trial lawyers. After convincing the homeowner to sign a broadly worded contract, they overstate the repair bill and file a hefty lawsuit against the insurance company, often leaving the homeowner caught in the middle of a claims nightmare.

Fortunately, Assignment of Benefits abuse is preventable. Here are some simple steps you can take to avoid getting caught in the middle of a home repair insurance scam:

1. Ask Around

Don’t hire a public adjuster or contractor based solely on an ad you saw online or in your local newspaper. Get recommendations from friends, neighbors, or nearby relatives. Before hiring a contractor, request a list of references and visit the sites to verify the quality of the work, if possible.

2. Do Your Research

Before hiring a public adjuster or contractor, go online and research what other people are saying about them. Several complaints and a low rating are potential indicators of shady business practices. Verify that your public adjuster is licensed through the Florida DFS Public Record, and search the Florida Department of Business and Professional Regulation portal to confirm that the contractor you plan to use has the required license or registration.

3. Never Pay in Full Up Front

Public adjusters are typically paid after a claim is handled. Never pay in full up front, and be leery of public adjusters who only accept cash payments. If you’re asked to put down a deposit, it should be no more than 25 to 33 percent of the total job cost. After the work is completed, wait to make your final payment until you receive a lien waiver stating that everything has been paid for.

4. Communication Is Key

Make sure your public adjuster communicates with you and keeps you well informed on fees and services. Public adjusters usually charge 10-15 percent of the total claim settlement, and your home insurance company typically will not cover these fees. Reliable public adjusters are usually more educated on policy coverages. Your public adjuster should be familiar with your policy and clearly explain what coverage and benefits you’re entitled to.

5. Get Everything in Writing

Request a written contract that includes a detailed list of the repair work to be done, costs, materials, start and completion dates, and warranty information. Carefully read the fine print and never sign a contract that you do not understand. If necessary, have your contract reviewed by an attorney first.

6. Report Fraud

Florida homeowners can cancel a home repair contract within three to five days of signing. If you suspect fraud, notify your home insurance carrier immediately and report it to the Florida DFS Division of Insurance Fraud, either online or by calling toll-free 1-800-378-0445.

7. Call Your Insurer First in the Event of a Loss

In the event of a loss, call your insurance company first. If your property was insured, your insurance policy is the best vehicle to recovery. Review your policy to make sure you understand your coverage by reading your policy's declarations page, which shows how your policy is divided into coverage categories (Dwelling, Other Structures, Personal Property, and Loss of Use/Additional Living Expenses). Your policy may also have additional Endorsements listed on your declaration page, including categories such as liability and medical payments.

At People’s Trust Insurance, your policy entitles you to 24/7 emergency service and covered damage repairs. Our affiliate, Rapid Response Team, is immediately deployed to your home to help mitigate damage and get the ball rolling on recovery. Filing a claim after a loss is nerve-wracking enough; the last thing you should have to worry about a home repair insurance scam. Following these tips can help keep you safe (and your home) safe.

You can also download our guide Protecting Your Pocketbook for tips on how to avoid falling victim to Assignment of Benefits fraud and abuse.

9 Home Repair Insurance Scam Red Flags Infographic