Hiring a Contractor for Insurance Claims

After your home is hit with fire, water, vandalism, or some other tragedy, you might need a contractor to help you clean up the mess. Some contractors supervise an army of other experts, and others do detailed work themselves. The help you’ll need depends on the damage you’ve endured. 

Most homeowners are eager to hire someone and get the cleanup started quickly. The faster the job gets done, the sooner you can move on with your life. However, it pays to take your time. A contractor does such important work—and many scammers prey on worried homeowners—so being cautious is a smart strategy. 

What Does a Contractor Do?

After your home is damaged, a contractor makes the repairs specified in the insurance adjuster’s report. The scope of work is defined by what the adjuster found and what your policy will pay for. 

Your contractor may work alongside other experts, such as environmental hazard inspectors, engineers, and local building officials.[1] However, the contractor’s main job is to restore your home to a livable condition per your supervision and instruction. 

A general contractor may work as a main point of contact for large projects involving plenty of damage. This person might hire subcontractors for delicate or complex tasks, but you may only work with the general contractor. 

Do This Before Hiring a Contractor 

Your contractor can tackle the most important part of your recovery: making your home livable once more. Unfortunately, several steps are required before you can hire someone to help.

After a disaster strikes your home, follow these steps:

1. File a claim. Work directly with your insurance company to start the claims process. 
2. Secure the property from more damage. Temporary repairs (such as putting plywood over windows and doors) can keep intruders and water out. Steps like this are required, as your insurance company may not pay for subsequent damage. 
3. Ask for help. If you must move out of your home while repairs are in progress, ask your insurance agent to release funds from your homeowners alternate living expenses (ALE) fund. 
4. Work with an assessor. Your insurance company will send an assessor to visit the property in person and determine an appropriate payout amount. You may need to negotiate a settlement that allows you to fix all of the damage. 

With these steps completed, you’ll have an approved claim and the opportunity to hire a contractor. Skip these steps, and you may end up paying for repairs out of pocket. 

How Do Contractors Work With Your Insurance Company?

Homeowners are responsible for selecting a contractor and supervising the work. The insurance company has no responsibility for this work.[2] It’s up to you to find the right person for the job and ensure it’s done right. 

Your insurance company may provide a list of approved contractors.[2] While you’re not required to pick from this lineup, it could be smart to do so. 

Sometimes, contractors find additional damage when they dig into home repairs. For example, a burst pipe in the middle of your basement may have triggered a smaller crack in pipes closer to the water intake. Contractors may need to submit change orders or requests for added funds. Approved contractors can typically handle this process quicker and with less hassle than non-approved contractors. 

While your contractor may have some interaction with your insurance company, payments don’t typically move from your policy to their account. Some contractors may ask you to sign a “direction to pay” form, so they can get checks directly from your insurance company. Know that you’re not required to use this process, and some homeowners have been scammed out of payouts through this scheme. 

The Baseline: Credentials for Contractors

Any contractor you hire should be licensed in your state. Ask for verification, and check it. 

The risks of hiring unlicensed contractors include the following:[3]

• Ignored permits: Unlicensed contractors may not follow local laws. If they don’t get the right permits or the job doesn’t comply with building codes, you may need to tear down and repair the work at your expense. 
• Liability: Unlicensed contractors may not carry insurance, leaving you on the hook for injuries on the jobsite. 
• Poor quality: Unlicensed contractors may not do a good job, and you may not discover problems until much later. 

Experts say people who hire unlicensed contractors often think they’re getting a good deal.[4] The bids may seem low and the time frames may be very short. But these homeowners often have to fix the damage left behind or pay multiple contractors to fix issues. Sometimes, homeowners lose their houses due to these scam artists. 

Unlicensed contractors often go door to door after disasters, pressuring people to sign up for quick repairs. Beware of scams. For example, a man allegedly accepted multiple Florida repair jobs with no license to do the work. He was charged with petty theft, among other crimes.[5] 

Some contractors hold specialized licenses. For example, your contractor may have a license with the Institute of Inspection Cleaning and Restoration Certification (IICRC) and is qualified to handle problems like mold. Ensure you check any certification you’re told about. 

Key Questions to Ask Your Contractor 

Ask at least three contractors to talk with you about your home and potential repairs. An interview can help you decide if the person is the right one for the job or if you should keep looking. Never accept a bid from a contractor who won’t submit to an interview. 

The following are good questions to ask:[6]

• Can you provide references? A qualified contractor will be happy to connect you with prior customers. Call them and ask about how the project worked. Ask about timelines, estimates, communication, and the finished project.
• How long have you been in business? An experienced contractor will have years of experience in your community. Someone like this understands local building codes and has connections that can speed up your project. 
• What is your registration number? A good contractor will be registered with your state contracting board. Ensure that’s the case, and see if any complaints have been lodged. 
• Do you have general liability insurance and workers’ compensation coverage? A qualified professional won’t ask you to take on unnecessary risks. They’ll have all the requirements to operate safely. 
• Is a permit required, and who will get it? Major projects often require permits. A qualified contractor will handle this step for you and give you an idea of how long the process will take. 

If your project is large, your team may include subcontractors. Ask how those professionals will be hired and vetted. You’re not required to choose them yourself, but you should feel comfortable that your contractor works with only the best people. If they can’t give you solid answers, it may be wise to keep looking.

Assess Your Estimates & Contracts 

Every contractor you consider should provide you with a written document to review and sign. Be wary of any blank lines on forms or missing pages. This contract is legally binding, and it should be detailed enough for you to make an informed decision. 

Contracts for home improvement projects should include this data:[7]

• Schedules: You should know when the project will start and stop. A detailed contract will include interim milestone dates too. 
• Detailed descriptions: You should know what the contractor will do, what materials will be used, and how the work will be done. 
• Financing data: You should understand when money is due and what forms of payment your contractor will accept. 
• Warranties: You should understand how the contractor guarantees the work and materials used. 

Every contract should conclude with your signature and the signature of your contractor. Don’t sign anything until you’ve read it carefully. 

Negotiate Like a Pro 

Once you’ve read the contract carefully, you may see opportunities for negotiation. Some contractors are willing to discuss the details and bargain for a good position. Others are hesitant. Before you haggle, ask your contractor.

If the contractor is willing to negotiate, you could ask for the following types of amendments:

• Better materials, especially if your adjuster’s notes support your suggestion
• Tighter time frames 
• Smaller overall costs 

Only you know what will make you happy from the completed project. Don’t be afraid to talk with your contractor about what you want and your willingness to barter to get it. 

Spot Common Contractor Red Flags

While most contractors are open and honest professionals, exceptions exist. After a widespread disaster (like a major storm), some shady people try to make money on troubled homeowners. 

Common signs of contractor fraud include the following:[8]

• Causing more damage during inspections to get a bigger project (and payout) 
• Contract violations
• High-pressure tactics that force homeowners to do things like sign rights away 
• Requiring cash down payments 
• Encouraging consumers to stop talking with their insurance companies 

Scams are relatively common. In one example, a fake contractor allegedly scammed a family out of $30,000 by requiring an up-front payment, which he then took to a different state.[9] Always be alert and aware. 

Project Management: Assessing the Work 

Your contractor is your employee, and the project involves your most valuable asset. Monitoring the process is crucial. 

Your contract should include key dates, including the beginning and end of construction. Your contractor should also provide you with a tentative list of milestones, so you can ensure the project is moving on schedule. 

Tools like HomeZada are designed to help you track complex construction projects, and they can be ideal if you’d like to be very involved in the process.[11] But some homeowners use tools like Google Calendar or Excel to track deadlines and processes. Find an approach that works for you. 

Don’t be afraid to visit your home and see how construction is progressing. Your goal isn’t to micromanage your contractor but to ensure that people are on the job and working hard. 

You may spot problems at this stage. For example, one homeowner hired a contractor for storm repair and noticed he rarely got the work done on time. She and the contractor texted one another 200 times in eight months, but nothing got done. In the end, she had to hire someone else to help.[11] 

Being proactive and visible can help your contractor stay on track. You’ll know when you need to step in and talk to them if things aren’t going as planned. 

Navigating the Payment Process 

Your contract should include plenty of payment details.[12] You should understand how much the project will cost, when payments are due, and what payment methods your contractor will accept. 

Your contractor should issue an invoice for each payment required.[13] Keep those invoices with other documents related to your claim. If possible, make payments with credit cards, as they offer additional fraud protection. 

Never let your payments get ahead of the work.[14] Ask to inspect the work that appears on the invoice, and only pay the invoice when you’re satisfied that it’s been done properly. 

Find the Right Contractor 

Reading horror stories about bad contractors can make you worry about your repair job. Know that you can find the ideal partner to help you recover from an incident—even if it’s major. 

Don’t rush the process and sign up with the first contractor you contact. Take your time, ask questions, and don’t be afraid to ask for a second opinion. It’s worth the effort to find the right professional. You’ll find a partner who is ready to collaborate and help you get back on your feet.