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Beware Scam Artists in Disaster’s Wake

Sept. 1, 2017
Homeowners Insurance, Insurance
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When severe weather leaves a trail of destruction, a different kind of danger can lurk in the aftermath: unsavory characters looking to cash in on cleanup and repair efforts. These fraudulent “storm chasers” can cause serious problems for victims and those who want to help them.

“Homeowners just want to put their lives back together again,” says Jim Quiggle, director of communications at the Coalition Against Insurance Fraud. “It’s easy to fall prey to smooth-talking con artists.”

Avoid dishonest contractors, fake charities and other schemes with these tips.

Common disaster scams and how to avoid them

1. Fake contractors

“Be wary of out-of-state contractors who show up at your door unexpectedly,” says Anna Stafford, spokesperson for the Texas Windstorm Insurance Association. These contractors come into town hoping to capitalize on widespread damage but may use low-quality materials, cut corners to increase profit or leave before the job is done.

How to avoid problems:

  • Request estimates from several local companies and read their reviews.
  • Ask for proof of address, licensing and insurance.
  • Check the Better Business Bureau for complaints.

2. Requests for upfront or cash payment

If a contractor requests full payment before starting repairs, that should be a red flag. He may take your money and run. Some may also be trying to avoid paying taxes or buying legally required insurance by requesting cash payments.

How to avoid problems:

  • Make a 20% to 30% deposit; pay the balance only when work is complete.
  • Pay by check or credit card, never in cash. This way, you can dispute payments if you find the work unsatisfactory.

3. Signing over insurance checks

Be wary of contractors who ask you to sign over rights to an insurance settlement check. Doing so gives contractors the opportunity to see how much you were awarded and adjust the bill accordingly and, like paying in cash, leave you no recourse if the work is subpar.

How to avoid problems:

  • If you have a mortgage, know that the check will likely be made out to your lender. Payment for repairs will be arranged through your mortgage lender.
  • If you own your home outright, “deposit insurance money in your bank account, then pay in phases after you and your insurer are satisfied the work was done correctly,” Quiggle says.
  • Refuse contractors who offer “to pay your deductible as an incentive to get your business,” says Jim Camoriano, a spokesperson for State Farm. This is nothing more than a shady marketing tactic.

4. Incomplete contracts

Steer clear of contractors who ask you to sign blank, incomplete or vague contracts with the promise of filling things in later. Blanks or statements like “see insurance estimate” allow dishonest contractors to enter unfair terms.

How to avoid problems:

  • Inspect your contract carefully before signing. Make sure your copy is identical to the contractor copy.
  • If you don’t understand the contract, ask your claims adjuster to review it.
  • Contracts should be official documents, not scribbled by hand, and signed by all parties before work begins.

5. Surprise damage

Contractors who suddenly find a new, expensive problem after work begins could be looking to inflate the bill.

How to avoid problems:

  • Halt repairs.
  • Contact your insurer immediately. “New damage discoveries may require considerable negotiation and discussion among the contractor and adjusters,” Quiggle says.

6. Fake government agents

Be skeptical if people who claim to represent the Federal Emergency Management Agency, or FEMA, show up at your door. Scammers may request your Social Security number or other personal information under the guise of completing a claim. They may even ask for payment to “speed things up.”

How to avoid problems:

  • If a supposed agent shows up, ask to see a government-issued photo ID.
  • Apply for FEMA assistance only by contacting the agency directly.
  • Remember, FEMA charges nothing for assistance, applications or inspections.

» FOR FEMA DISASTER HELP: Visit or call 1-800-621-FEMA.

7. Car fraud

People may attempt to fix and resell flood-damaged vehicles, a practice that was common after Hurricane Katrina. While it’s not illegal to sell a flooded vehicle, hiding damage from a buyer could be a criminal offense.

How to avoid problems:

  • Use a vehicle identification number (VIN) to get a vehicle history report from an agency such as Carfax or AutoCheck.
  • Inspect the vehicle, title and ownership papers for hints it may have been a salvage vehicle, which means it had such severe damage that the insurance company has declared it a total loss.

8. Phishing for donations

Emails seeking donations after a disaster should be handled with caution. They may be used to steal funds or your identity, or to infect your computer.

How to avoid problems:

  • Don’t click links or open attachments in unsolicited email messages.
  • Verify organizations by contacting them directly. Contact information can be found on the BBB Wise Giving Alliance.

9. Flood insurance robo-calls

These deceptive calls tell people their flood insurance premiums are past due. A message demands immediate payment in order to be covered for a recent flood.

How to avoid problems:

  • Hang up the phone immediately.
  • Call your agent or insurer to confirm policy status.
  • Call the National Flood Insurance Program at 1-800-638-6620 if you have federal coverage.

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