When damage happens to a home due to circumstances beyond your control, your home insurance is there to help pay for the repairs. That is the peace of mind that good insurance provides.
Unfortunately, however, there is always someone out there who will try to scam others. The Insurance Bureau of Canada (IBC) is warning people to look out for contractors who may try to take advantage of someone whose insurance company is funding their repairs. Watch for signs of restoration fraud when having someone work on your home.
What is restoration fraud?
Restoration fraud occurs when a contractor overbills a client thinking that their insurance company will simply just pay for the full amount. It can be difficult for a homeowner to spot restoration fraud as most are not contractors themselves, and therefore not aware of what the true cost of the job should be. Restoration fraud not only costs insurance companies money, but also hurts other homeowners as the increased cost of claims is often mitigated through rising home insurance rates.
How to avoid being scammed
Your insurance company can recommend a preferred contractor for the repairs necessary to your home, which is one way to avoid restoration fraud. Preferred contractors are chosen by insurance companies because of their experience and background. They need to meet certain requirements and have the correct accreditations, plus generally come with a degree or a diploma. They are also fully insured and licensed.
You don’t have to use the contractor recommended by your insurance company, however, and many make the choice not to. It is completely up to you. Here are some steps to take to avoid being scammed.
- Do your research about your contractor. Contractors are required to hold a valid City of Calgary business licence, and the City has the authority to suspend or revoke this licence during a Licence Review Hearing. Also check their references, check in on past work, and also check to make sure they have Workers Compensation Coverage.
- Have a comprehensive contract drawn up and be sure you fully understand all the details. If it doesn’t make sense, it’s probably a bad sign.
- Also be sure you understand the project – what it entails, how much time it will take, how much disruption there will be, and what sort of tools and machinery will be used.
Additional contracting scams
Contracting scams are relatively similar across Canada, according to HouseLogic.ca. While most contractors are honest and hardworking, those who are corrupt can create a bad name for the entire field. That’s why it’s so important to weed out the bad apples as they arise.
- One way to know you may be about to get scammed is when a contractor demands to be paid up front, usually for materials. Experts advise never prepaying more than $1,000 or one tenth of the quoted price, whichever is less.
- Another common ruse is failing to put all of the job details into the contract. Even though you may feel as though you have a clear understanding of what the job entails, if you do not have everything in writing there is little to no recourse for details that do not get done.
- Unlicensed contractors will often try to skirt the rules by telling you that a permit is not needed for a job. By always insisting that your contractor get the right permits in place before starting the job you can easily weed out those who are unlicensed.
- Contracting jobs often run over schedule, and usually for good reason. However, if your contractor is constantly stalling for unforeseen issues, this is a sign a scam is underway. Bad contractors will underbid to win the job, and then find reasons to keep jacking up the cost while working. Make sure your contract contains procedures for a change order. The additional work should only be able to proceed when both the contractor and the homeowner sign the change order.
Report fraud when you see it
Fraud costs Canadians more than $1 billion every years, says the IBC. The best way to fight against restoration fraud is to fight it when you see it. If you know about or suspect insurance fraud, you can anonymously report it to the IBC by filling out a confidential online form or by calling 1-877-IBC-TIPS (1-877-422-8477) 24 hours a day. Fraud alerts are also available on the IBC website.
Contractors need to be protected, too
If you have any questions about contractors insurance in Alberta, don’t hesitate to turn to us at Lane’s Insurance. We are a full-service Alberta-based brokerage offering a comprehensive selection of insurance products at competitive rates, along with value-added service and claims support. Contact Lane’s Insurance directly if you have a situation you’d like to discuss with one of our experienced insurance brokers.
