Contractor & adjuster scams

It can happen to anyone... Hurricanes, tornados, hail or fires can leave your home and business in ruins. You want to get back on your feet quickly.

But a disaster also lures crooked building contractors and public insurance adjusters. They'll exploit the confusion and emergency conditions to try and fleece you and your insurance policy.

Most contractors and public adjusters are honest. But know the warning signs of a swindle — and how to fight back.

Just as important, don't try to inflate or fake insurance claims yourself. Jail time, fines, humiliation, and separation from your family and friends — it's a big price for trying to scam a few insurance dollars.

Contracting with contractors

Several bids. Obtain two or three written repair bids, if possible. They should include all costs, what work will be done, schedule for completing the work, and guarantees.

• But... don't accept a bid just because it's the lowest. Lowball bids such as "special hurricane deals" and "limited time offers" could be fraudulent.

• And... don't pay for repair bids. Crooked contractors may simply take your money and disappear. Most reputable contractors won't charge you simply for bidding on your repair work.

Local contractors. Use established local contractors, if possible. But... be careful if the contractor arrives in an unmarked vehicle, seeks your repair work door-to-door, or tries to cut costs by using materials "from another job." These contractors may be unlicensed, dishonest and untrained transients from another state.

• Often they'll use low-grade material.

• Their work may be shoddy and even dangerous.

• They may disappear with your money after finishing only part of the job, or not doing any work.

Licenses. Ask to see a contractor's required state or local licenses, and write down the license numbers. Also ask contractors for proof that they have liability and workers compensation insurance.

Look professional? Does the contractor have professional-looking business cards and letterhead? If not, you could be dealing with an untrained and incompetent "wildcatter." Signed contract. Get a signed contract — before work begins. But don't sign any contract with blanks. A dishonest contractor could fill in unfair or fraudulent terms later.

• Also... make sure it's a legitimate, printed document — not something scratched out on a piece of paper. Make sure you have a copy for your files.

No advance payment. Don't pay a contractor in full before work begins, or before it's finished. The contractor could disappear with your money, leaving your repair job unfinished. Normally you should only pay about 20 percent or less upfront.

• And... don't pay extra when a contractor says the cost of materials has "suddenly increased." Pay only what's spelled out in your signed contract.

No cash. Never pay in cash; pay only with check or credit card. A contractor who demands cash may be trying to avoid paying taxes or buying legally required insurance.

Repairs insured? Check with your insurance company to make sure your policy covers the repairs. Also have your insurance adjuster estimate the damage and probable cost to repair. This will give you a reliable basis for negotiating repairs with contractors.

Inspect damage. If practical, have an adjuster from your insurance company inspect your damage before repairs begin. Your insurance company may require an adjuster's inspection before you rebuild.

Your insurance claim could be denied if you make expensive, permanent repairs before the adjuster inspects the damage.

Signing off. Sign the certificate of job completion only when all repairs are finished to your satisfaction, and per your signed contract.

Fight back. Contact your state insurance fraud bureau and local office of consumer affairs right away if you suspect a repair scam.

Adjusting to adjusters

Insurance companies employ their own adjusters. They'll evaluate your property damage and help walk you through the claims process, free of charge. In many states, you can also hire public adjusters to help you file claims and negotiate your insurance payment. Public adjusters represent the claimant, and usually charge you 10-15 percent of any insurance settlement.

Schemes. Most public adjusters are honest and competent, but some are crooked. They may come from out of town, and go door to door, trying to bilk disaster victims with insurance schemes. They might:

• Charge you a large fee, and then disappear without handling your claim.

• Refer your repair to a dishonest contractor for a kickback, and you may receive shoddy repairs in return.

• File false and inflated claims against your policy. Sometimes they'll also try to convince you to join the scheme.

• Use their position of trust to access your Social Security number and other personal data for scams involving identity theft.

Licenses. Public adjusters need licenses in most states. Ask your state insurance department if an adjuster is properly licensed in your state, or has any complaints or disciplinary actions. If the adjuster comes from another state, contact that state's insurance department to make sure the adjuster is licensed.

References. Ask people you trust if they can recommend a reputable adjuster.

Learn more. To learn more about public adjusters, check out websites of organizations such as the National Association of Public Insurance Adjusters.

Fight back. If you suspect a public or insurer's adjuster is being dishonest, contact your state insurance department right away.