The hail storm came in quickly and left missing shingles, pits, scars, and other roof damage in its wake. It was our first year of home ownership, and my husband and I were dismayed to realize that we were going to have to get a roofer to repair the damage the storm had caused.
The day after the storm, a contractor came calling door-to-door in our neighborhood, offering to handle the repairs. He even said he would contact our insurance carrier on our behalf, in order to make the whole process simpler for us.
Several weeks later, we learned that this contractor was using some pretty shady business practices, and was doing a mediocre job (at best) on the roofs he did repair. We were glad that we had already contacted our insurer before he knocked — and had been warned against hiring unsolicited roofers.
Unfortunately, having to avoid shady contractors (and worse) in the wake of a natural disaster is a common experience. After a natural disaster occurs, fraudsters, unscrupulous businesses, and con artists often try to victimize the residents a second time by scamming them in the midst of the cleanup effort. Here’s what you need to know about the most common types of post-natural disaster fraud, and what you can do to protect yourself.
The Fraud: Contractors Asking for Upfront Payment
It should be a red flag if any contractor you are considering hiring asks for all of the payment (or a large percentage) up front. While the request may sound perfectly reasonable — your contractor may claim that he or she needs upfront payment to cover the cost of supplies and equipment — the reality is that many contractors who make such a request either disappear with the money, or do inadequate work.
This is why the Better Business Bureau recommends that homeowners pay no more than one-third of the full cost of the job upfront. In addition, you should make sure your contract spells out the payment schedule, so that you and the contractor both know what to expect.
Another thing to keep in mind is that contractors who ask for upfront payment will often use pressure tactics to get you to comply. You should never hire a contractor who is attempting to pressure you or scare you into employing his or her services.
You can avoid falling victim to such fraudulent contractors by doing your homework. Commit to getting at least three bids from companies that you have investigated to determine that they are legitimate. That makes it much easier to say, “Thanks but no thanks” to any high-pressure contractors trying to force you to pay them upfront.
The Fraud: Misuse of an Assignment of Benefits Contract
The Assignment of Benefits (often referred to as AOB in the insurance industry) is a document that gives a contractor or other third party the right to make decisions on behalf of an insurance policy holder. What this means is that a contractor who holds your AOB contract can seek direct payment from the insurance company.
This was the scheme that the door-to-door roofer was trying to pull after the hail storm that damaged our roof. At first glance, providing an AOB to a contractor seems as if it will simplify the repair process, since it eliminates the middleman (you). You can simply sit back and let the contractor and the insurance company deal with the financial side of things while you watch your home get repaired.
Unfortunately, there is a big flaw in this system. When you provide an AOB to your contractor, that means the contractor is now aware of how much money your insurer is willing to spend on repairs. Contractors who are not on the up-and-up will inflate their bills by making more severe and/or more frequent claims to your insurer.
According to a 2016 study by the Florida Office of Insurance Regulation, “claims with an AOB have a much higher severity than claims without one (nearly 85%) and the frequency and severity of…claims has progressively risen since 2010.”
Though it adds time and complexity to the repair process, it can be smarter to forgo the AOB and handle payments to the contractor and reimbursements from the insurer yourself. This will ensure that the appropriate claims are filed and that the repairs are no more and no less than what you need — and, ultimately, this will help keep your premiums more affordable in the future.
The Fraud: Fake Robo-Calls From Insurers
In the wake of Hurricane Harvey in 2017, many storm survivors received a robo-call informing them that their insurance premium was past due, and that their flood insurance would be cancelled if they did not immediately send money.
These calls were not from insurance companies, and were instead an outright con created to fleece people who were already desperate. The disaster parasites who prey on storm survivors know that in times of high stress and emotion, people are less likely to ask questions and think rationally.
Here’s how you can keep such bloodsuckers from getting your hard-earned money: Always go straight to the source when it comes to information about your insurance policy.
If you receive an unsolicited phone call (whether it is a robo-call or an unsolicited phone call from someone claiming to be from your insurer), hang up and place a call to your insurance agent. If the first call was legitimate, your agent will have that information and help you figure out your next steps. And, if it wasn’t legitimate, you have avoided giving money to a con artist.
The Fraud: Fake FEMA Job Postings
Another scam that arose in the wake of Hurricane Harvey was a fake job posting that circulated on social media. This job posting claimed that FEMA was hiring 1,000 people at a rate of $2,000 a week for 90 days, and it provided an 888 phone number to call.
According to FEMA, this job offer was a scam. Once you called the phone number, there was some sort of payment required to apply for or take the “job.” This sort of scam works because FEMA does hire short-term field inspectors in the wake of a major natural disaster, so it can be difficult to know at a glance if such a job posting is real or fake.
However, FEMA has pointed out that it does not use 888 phone numbers for its job postings, which is the initial clue that a posting is not legitimate. In addition, you can always navigate to FEMA Careers to see if a posting is legitimate.
The Fraud: Identity Theft
One of the most common (and maddening) types of fraud involves identity theft. With these scams, fraudsters will steal the identity of a real natural disaster survivor and then apply for relief funds under the assumed identity. According to The Washington Post, “From Katrina, more than 1,400 federal fraud prosecutions were launched, as well as untold numbers of state prosecutions.”
The upshot of these scams, however, is that it slows down relief fund payments, as government agencies take their time to investigate claims to prevent payments to scammers. Some Hurricane Sandy victims had to wait 18 months or longer before receiving their relief payments — but the investigations ensured that fewer phony requests received relief funds.
The Fraud: Charity Scams
While many of the scams surrounding natural disasters victimize the survivors themselves, charitable scams take advantage of the generosity of those who want to help those survivors. These bogus victim relief funds are often shared via social media, where a plausible request for donations includes a link to a fraudulent “charity.”
The best way to donate money to help those affected by natural disasters is to go directly to the charity’s website. If you are not sure what charity deserves your money, the Better Business Bureau keeps a list of charitable organizations that meet its 20 Standards for Charity Accountability. (In addition to this list, the BBB also maintains specific lists for helping areas affected by particular disasters, such as Hurricane Harvey.)
Protecting Yourself After the Storm
It hardly seems fair that storm survivors need to beware of potential fraud after a natural disaster, but fending off scam artists and unscrupulous contractors is an almost inevitable part of the cleanup. You can help keep yourself safe from these disaster parasites by taking some basic precautions.
To start, the best way to protect yourself from scams is to get in touch with your insurance company as quickly as possible after a natural disaster. Your insurance company can help you understand what your policy covers and advise you on the next steps to take for getting your home back to normal.
From there, it’s important to bring a healthy level of skepticism to any unsolicited offers that come your way. Before you make any decisions, double check on the contractor, policy, job offer, charity, or any other offer or request that you receive.
Cleaning up after a natural disaster is hard enough without adding fraud into the mix. Making sure that you verify information and offers before making any big recovery decisions will save you time, money, and a great deal of heartache.