Storm Damage: Is Your Contractor Committing Insurance Fraud?

It’s the middle of the night. You’re sound asleep.  Suddenly, you’re awakened.  Something doesn’t sound right. What is all that commotion?  Then, it hits you…

You’re in the middle of a terrible storm. You can hear the hail pounding away on your house and your roof.  It’s bouncing off windows, gutters, cars, everything.

Now, you, as a homeowner, are either in one of two groups:

You took proactive measures and called your insurance company to file a storm claim and have an adjuster come out to evaluate your home.

— or —

You thought there was no damage and dismissed the storm. That is, until your door began to get knocked down by roofers offering roof inspections. 

Regardless of what camp you belong to, you, at some point in the process, will speak with a roofing contractor to have your home repaired.  Either by speaking to one of those knocking on your door, or after you have met with and received the information and approval from your insurance company.  Now, if you’re like the typical homeowner, you haven’t gone through the process of filing an insurance claim on your home before.

If you’re above average, maybe you’ve gone through it once, or twice. — still, not enough times to truly understand and know the ins and outs of everything.  And guess what, roofers know that!  And the insurance company knows that!  It’s not a secret.

The following probably sounds somewhat familiar, give or take a few words here-and-there:

*knock knock*

“Hello? Can I help you?”

“Hi, my name is Joe and I’m with ABC Roofing. We’re in your neighborhood today doing roof inspections for some of your neighbors who had storm damage and I’d like to offer you the same. We work with your insurance company to get them to pay for the damages so there’s nothing you need to worry about.”

“Well, I don’t have the money for my deductible, so I’ll pass.”

“Oh, don’t worry about that. I can help you out.”

Sound familiar? Of course it does.

It’s standard ‘roofing linguistics.’  But, that begs the question, what does ‘I can help you out.’ mean?  Before we get to that question, let’s take a step back and cover some basics…

When you purchased your home, you also purchased an insurance contract, which states that if there are certain damages to your home that fall under certain provisions, the insurance company will pay for those damages.  In consideration for the agreement from the insurance company, you agreed to pay a percentage of the insured amount — your deductible. (typically 1% or 2% of the insured amount of your home)

So, we have a binding contract — your insurance company agrees to do something and you agree to do something.

Now, back to the question…

Can A Roofing Contractor Pay For Your Deductible?

In a single word – ‘NO.’ 

It is a matter that really has no debate to it.  In the world that we live in, unfortunately, there are far and wide too many roofing contractors in this business that simply have unethical business practices and choose to partake in, for lack of a better word, ‘shady’ business practices.   And they’re bringing you down with them.

Talk to you insurance carrier, review your policy, review the very claim approval documents you were provided, and you will never see anything, remotely related, to ‘sure, your contractor can pay for your deductible.’

Now, you may be inclined to think, ‘it doesn’t really matter who pays for it’ but that’s not exactly how it works out.

The fact of the matter is that when you chose your insurance carrier and signed your insurance policy, you agreed to a certain amount as your deductible.  And you agreed, that should there be damage to your home that is covered under the provisions of your policy, you would pay this specified amount, while the insurance will pay for the rest.

It doesn’t matter if it is $100 over your deductible or $100,000.  Your policy is a contract between you and your provider of choice.  You have options when purchasing your insurance. It’s an open marketplace.  You can have a lower deductible, with a little bit higher premium.  Or, you can have a higher deductible, with lower premiums.  And, of course, coverage’s will vary from policy to policy.  But, those are all your choices to make. 

Let’s look at an example situation for illustration purposes:

Bare with me now, this is going to get tough…

You have a policy with a $2,000 deductible.

Your roof suffers storm damage and your insurance agrees to replace it.

The estimate for replacement (known as the RCV, or Replacement Cost Value) is $12,000.

Subtract your $2,000 deductible from $12,000 estimate and you are left with $10,000. ($12,000-$2,000=$10,000)

This amount — $10,000 — is what your insurance owes.

You owe $2,000 per your policy agreement.

Insurance payments are typically broken out into two (2) payments – the first payment (known as ACV, or Actual Cash Value) and the second payment (known as depreciation.)

For this example, let’s assume that ACV is $10,000 and the depreciation is $2,000.

Upon approving your claim, the insurance will issue a check for $8,000.

This figure comes from the fact that ACV of the total claim is $10,000, but your deductible of $2,000 will be deducted out. Leaving $8,000.

Once you have completed all the repairs and paid your deductible ($2,000) an invoice will be sent to your insurance. They will then release the remaining depreciation amount of $2,000.

Your insurance has now paid a total of $10,000, completing the total $12,000 claim. ($10,000 from insurance, $2,000 from you)

I know, it can be a little confusing at first. Reread if you need to, or write it out on some paper. But, it’s an important concept to understand.  

In fact, for any damages, totaling above your $2,000 deductible (per the above example), your portion is always $2,000 and whatever is left is due from your insurance.  Reading through your policy, and even your claim report, there will be lots of fine print about your deductible, but the basics are – you are always responsible for that amount. It is always subtracted first, from any claim payments made.

This leads us to…

But I found a company who is willing to do the job for less than what the insurance said they would pay me. Can’t I keep the rest of the money?

Again, in a word – no.

Remember, in the example above, an amount was taken out for depreciation?

This amount is taken out for a couple of reasons:

  1.  to make sure the work is actually completed

  2.  it is only recoverable if  it was accrued. (emphasis on if)

On your claim documents it may read as something like “Net claim if depreciation is recovered.” The ‘if’ meaning you have to spend it to recover it.  From the example above, if your insurance said $12,000 and you find a company that says they’ll do it for $10,000, your insurance now only owes $8,000.  You didn’t find a way to save your money, you found a way to save your insurance company money.  But don’t be expecting a ‘thank you’ gift from them.  

Simply put, shopping for a ‘better’ roof price does not help you in any way.

Pricing during insurance claims is determined by the insurance. (although, as a contractor, we work with them to ensure everything is actually being paid for fairly)  Typically, it just means that you found a company that is probably skimping on some important aspects of replacing your roof.

And is putting you in a situation where insurance fraud is being committed.

See, your insurance provider will end up asking for copies of the invoices to show that the work has been completed.  If you were so lucky to find one of those companies that said ‘don’t worry about your deductible, we can help you.’  they are actually sending a falsified invoice to your insurance provider. On your behalf.  Going back to the above example, they may have ‘charged’ you $10,000.  But they know that if they send that invoice to your insurance, the insurance would not pay in full.  Therefore, the company sends an invoice for $12,000, that way the insurance has paid a total of $10,000 and now you ‘magically’ didn’t have to pay anything.

Except, it’s not magic.

It’s wrong. And criminal.

Other times, the insurance company may even ask for copies of the deductible check, to show that it was paid and collected, before they will release the remaining depreciation amount.  Do you really want to trust your home and your family to a company operating on these practices?  It is simply not worth putting yourself and your family at risk by dealing with an unethical company whose only motivation is getting paid and will not thoroughly educate you on the situation.

If you want an honest roofing company who will protect you and your home contact ReNew Roofing and Construction via email: sales@renewroofingllcwi.com or visit our website: www.ReNewRoofingLLCwi.com

Oh, and P.S. 

We know the deal. Getting in touch can sometimes feel like a risk because you think someone might take advantage of you and treat you like a steak, and they’re a hungry wolf. It feels gross and we don’t like it.

So, here is our promise that is Iron Clad: We are here to serve, rather than make a quick buck.

We will always provide the same level of service we would expect for our own family. No fast-talking, hard-pushing, sales tactics. Just plain, simple, old-fashioned, honesty.