After you’ve had a fire or hail incident in your home, you’ll find yourself looking for a contractor to do the repairs. There are some phrases you might hear about
“We’ll waive your insurance deductible.”
“Don’t worry. We pay your deductible.”
Contractors claim all the time that they’ll absorb your insurance deductible. It sounds great, right? You as the homeowner don’t need to pay $1000 or more in a cash deductible.
You’ll hear it phrased several ways. The contractor will “absorb”, “waive”, or offer to pay the deductible.
The problem is that it’s not legal. It’s all about the fact that the contractor, no matter what they say, needs to be paid that $1000. In many cases, that’s their entire profit. In order to get that money back, they have to mislead the insurance company about the cost of doing the work.
How the Deductible Waiver Works
Let’s walk through a scenario:
Your house was damaged in a hailstorm. The roof was torn apart and will need to be completely replaced.
You look for a roofer online and choose one that says they’ll waive your insurance deductible up to $1000.
The contractor comes out and says that it will cost $9,000 to replace the roof. You don’t have to pay anything.
This is where it gets complicated. Back in the day, if the job was $9,000, the insurance company would cut a check for $8,000 and it didn’t matter. If the contractor was ultimately willing to take $8,000, no one really cared.
Today, the insurance companies have what’s called Replacement Cost Value (RCV). Rather than lump sum payments, they’ll issue several checks as the replacement process is going forward.
They will look at the cost estimate of the repair, subtract the deductible, and the depreciation of the roof. An invoice is sent after the roof is completed to get the contractor paid.
For the contractor to recoup the deductible, they will lie to the insurance company and inflate the price by $1000.
That is insurance fraud. They’re billing for more than the actual cost. The cost should have been $9,000 minus the $1,000 deductible. To cover the deductible, the contractor will bill $10,000. The insurance company will then be expected to pay the original $9,000.
Colorado Senate Bill 38
In the state of Colorado, there is a law specifically prohibiting the practice of waiving the insurance deductible.
Provision number seven of the bill states:
“A statement that if the property owner plans to pay for the roofing services through an insurance claim, the contractor cannot pay, waive or rebate the homeowner’s insurance deductible in part or in whole;” - https://crej.com/news/know-colorados-roofing-contract-rules-penalties-protections/
The entire bill is worth reading if you live in Colorado. It was created to protect you from unscrupulous contractors. The link above to the Colorado Real Estate Journal is a great resource that explains the law nicely.
What Does this mean to the Homeowner?
As the homeowner, the contract is really between you and your insurance company. While the contractor might be held accountable, the insurance company might cancel your policy for “fraud”, making it harder for you to get homeowner’s insurance. If you’re still paying a mortgage, that can cause massive issues for your mortgage as well.
How to Get the Best Deal for Your Roof Replacement
Getting the best price on your roof replacement is not difficult, but it might take a little bit of legwork.
If you’ve had hail damage to your roof, you need to start by getting some tarps put up as soon as possible. It’s important that you protect the wood and whatever underlayment was let on the roof.
You should be able to contact any local roofer to get that job done. Most of them can come out in a few hours to put up tarps. While you always want to make sure that you save money, it will cost you much more if water damages the plywood.
From there, you should get several bids. While an app might seem like the easy way to get a lot of bids, these apps might skew the numbers. Since there are fees associated with apps, the prices can sometimes be artificially inflated.
Talk to your contractors to make sure that they understand what you’re trying to get done and what your expectations are.
This is a place to be careful. Above we talked about the deductible waiver concept. You will also find some companies that will prey on your desperation and worry. They will look to use your fears and lack of experience with your homeowner’s insurance to get more money out of you.
Be certain that the company you choose has a history in your area, for example in Colorado, Water Restoration has tons of experience. Too often, when there’s been a large-scale disaster, lots of fly-by-night companies will show up to try and take advantage of homeowners.
Don’t give anyone cash. If a contractor asks you for cash up front, there’s a really good chance they and the money will disappear. You’ll usually hear from them that they need money to buy materials. That’s something that your insurance company will do.
A contractor should be willing and able to contact your insurance company to get everything started for you and make it all go as smoothly as possible. Fire & Hail always does this to ensure a smooth and stress-free process.
Another way to protect yourself is to speak to your insurance agent. Many of the companies in your area will be familiar to your agent. While they have a “preferred” list, you can go off that. Nonetheless, the agent will probably know most of the established companies in your area.
While we’ve been talking about roofing, these same rules apply for any work you need done on your house, especially if it’s urgent. If you have any questions or are in need of restoration/repair services, the Water Restoration team is your go-to.