Tips to avoid insurance scams after a natural disaster

The massive 2017 Tubbs Fire in Northern California wiped out more than 5,600 structures. In its aftermath, construction companies flooded the region, offering to help residents rebuild their homes.

One builder never made good on its promises. After signing contracts with clients, it repeatedly put off construction start dates and failed to make progress on the rebuilds it started. Some homeowners forked over more than $100,000 before realizing that the company had no intention of completing the work.

The company’s owners were convicted of fraud in 2023. Their story is a reminder that, sadly, natural disasters are a magnet for con artists hoping to capitalize on the chaos. If you must rebuild or repair your home after such an event, consider these tips.

Report the loss to your insurer. Your agent will walk you through the steps needed to get your home repaired. Ask for an estimate of repair costs to use as a benchmark when you solicit contractor bids.

After a natural disaster, fraudulent construction, repair, and cleanup companies will call, email, text, and go door-to-door to sell services. Others pretending to be insurance company or government employees will promise aid, but only if the homeowners give up their Social Security and bank account numbers.

Don’t fall for these pressure tactics. Ask to see the contractor’s “pocket license” or the representative’s “Home Improvement Salesperson” registration, plus a photo ID. All California contractors are issued pocket licenses that show their licensed trade and the license expiration date.

It’s best to work with service providers you know or who have been recommended to you. However, after a disaster local contractors are often overwhelmed. If you must hire someone without a referral, look up the contractor’s rating with the Better Business Bureau and inspect his or her license and insurance certificate. Your city’s planning department can help guide you.

Before construction begins, insist on a contract that specifies the work to be done, start and end dates, and costs broken down by labor and materials. Ensure that the contractor’s name, contact information, and license number are included. Keep the signed contract, along with change orders, invoices, and contractor correspondence, in one secure file. If disputes arise, you’ll have the documentation you need.

Q: The contractor I’ve hired to replace my kitchen’s flood-damaged floor wants me to pay in full before he starts the work. Should I?

A: No. Never pay a contractor in full in advance. You should generally pay no more than one-third of the total cost up front, though some states have stricter rules. In California, for example, the legal limit for a down payment is 10% or $1,000, whichever is less.

Have you experienced a major life event? Make sure all your policies are up-to-date. Go to AAA.com/myaccount. For other insurance information, go to AAA.com/insuranceinfo, call (844) 226-3897, or visit your local Auto Club branch.