Have you ever turned on the light in a dark basement and shuddered as cockroaches scurried away? I get that same sense of revulsion whenever I hear about unscrupulous swindlers taking advantage of the victims of natural and manmade disasters.
The Better Business Bureau has dubbed these human cockroaches "Storm Chasers" because they creep out of the woodwork after every major storm or disaster. In fact, because fraud was so widespread after Hurricane Katrina, the Department of Justice created the National Center for Disaster Fraud, a central information clearinghouse for more than 20 federal agencies where people can report suspected fraudulent activities tied to disasters of all types.
One common scam is where supposed repair workers blitz impacted neighborhoods, hoping to ensnare frazzled homeowners. Their typical line is, "We're really slammed but with a cash deposit you can ensure a spot on our busy schedule." Or, they'll scare people into thinking their home is dangerously unsafe, sometimes actually creating damage during their "inspection."
Often, these Storm Chasers just take the money and run. Or, if they do show up and make repairs, their work or materials are shoddy. This could leave you on the hook financially since your homeowners insurance probably won't cover unauthorized or fraudulent repairs.
Here are a few tips from the Better Business Bureau to avoid becoming a Storm Chaser victim:
Ask your insurance company about what's covered under your policy and specific filing requirements. Also ask them to survey the damage and see whether they have approved contractors.
Never hire a laborer or contractor on the spot. Get at least three estimates based on the same specifications and materials. Check their references, licensing and registration information with the National Association of State Contractors Licensing Agencies (www.nascla.org/licensing-information); also read reviews posted by the Better Business Bureau.
Require written contracts that specify work to be done, materials to be used, start and end dates, responsibility for hauling away debris, and costs broken down by labor and materials. Verify that the contractor's name, address, phone number and license number are included, as well as any verbal promises and warranties.
Read the fine print. Some shady contracts include clauses allowing substantial cancellation fees if you choose not to use the contractor after your insurance company has approved the claim. Others require you to pay the full price if you cancel after the cancellation period has expired.
Ask your contractor to provide proof of current insurance that covers workers compensation benefits, property damage and personal liability.
You'll probably be asked to pay an upfront deposit to cover initial materials - one-quarter to one-third is reasonable upon delivery of materials to your home and once work begins.
Never pay in full in advance, and don't pay cash. Have the contract specify a schedule for releasing payments, and before making the final payment, ask the contractor to provide proof that all subcontractors have been paid - if not, you could be liable for their fees.
And finally, remember the adage, "If it sounds too good to be true, it probably is." If someone uses high-pressure sales tactics, requires full payment upfront, asks you to get necessary permits or offers to shave costs by using leftover materials from another job - run. They're potentially disastrous to your bottom line - and you've been through one disaster already.
Jason Alderman directs Visa's financial education programs.