Preferred Contractor Endorsements
Preferred contractor endorsements involve an insurance company requiring a policyholder (homeowner or business owner) to use a specific contractor to perform repairs on any damage the property sustains due to a covered peril such as hurricane or storm damages, sudden and accidental burst plumbing pipes, smoke or fire damage, burglary, etc. or similar covered perils. In many cases, policyholders have uncovered that the insurance provider will only pay to cover the costs if the policyholder agrees to appoint the insurance provider’s specific contractor. There are variations of the preferred contractor endorsements depending on the policy. Some insurers reserve the right or may opt to have their preferred vendor complete the repairs; other may opt to only pay out what the preferred contractor determines is the cost to repair. A preferred contractor endorsement clause is frequently hidden in the fine print of many homeowners’ insurance policies. Deceptive terms the insurance companies may utilize include Concierge Program, Select Vendor, Managed Repair Program, etc. The insurance providers emphasize the use of a preferred contractor will save a homeowner on the cost of the yearly premiums. The problems occur when the preferred contractor does not scope the repairs adequately, does not complete the repairs correctly, never shows up to do the job, or creates even further damage. Warning to consumers: Don’t be a penny smart, pound foolish.
Hidden Clauses in a Homeowners’ Insurance Policy
When repairs go wrong with a preferred contractor, in many cases the insurance company will refuse to pay for the hiring of a different contractor. The homeowner is left responsible for this cost out of pocket, generating even more existing financial hardship. Preferred contractors can also be referred to as “blanket” or “automatic” contractors in the fine print of a homeowners’ insurance policy, but the terms mean the same thing. In the cases of substantial damage to property by no fault of the homeowner, an insurance company will often send out the preferred contractor without first notifying or asking permission from the owners.
A common defense (by the insurance industry) of the use of preferred contractors is the reduction of incidences of insurance fraud, and insurance companies most often cite this as a reason for the preferred contractor clause requirement. Even with the intentions to prevent the filing of false claims, a significant number of homeowners have run into hardships due to this practice. Some of the most serious cases involve the use of managed repair clauses tied to the use of a certain contractor that the insurance company chooses. Instead of issuing the homeowners payments to hire their own (trusted) contractors of choice, the insurance company will automatically dispatch their own contractors. Another common reason insurance companies attempt to convince the policyholders for this practice is that the preferred vendor saves the homeowner time and effort spent in shopping around for his or her own contractor. So, if your brother or sister is a carpenter or general contractor, you cannot use him/her.
The Option of a Public Adjuster
The main problem with the use of preferred contractors is that the homeowners are taken out of the decision-making regarding their own property. Insurance companies dictate what (the scope), when, how (such as quality of work and materials) the repairs will be completed and who will be completing the repairs. Many of the workers are not full time employees of the contracting firm and are simply day workers; none having background vetting. What does this mean? The policyholder may have felons, drug users, and shady characters in their home or businesses exposing their families to such questionable creatures. Your home is yours and your family’s castle. You should be able to choose who enters into your home or business. If a homeowner disagrees to any of these terms, the insurance company will deny the claim (you could also be in breach of the terms of your contract/policy). In some instances, this can even lead to hikes in the homeowner’s yearly insurance premium. Sometimes the preferred contractor is sent out to commence repairs before an insurance company representative has had the chance to inspect the damage. The use of a public adjuster is essential to help avoid many of these problems associated with preferred contractors. A policyholder should contact a public adjuster immediately upon discovery of any type of damage. The public adjuster will evaluate all aspects of the potential claim and provide professional advice, ultimately handling all phases of the claim for the policyholder. The public adjuster represents the policyholder and has no ties to the insurance company or to any of the retained contractors. Homeowners always have the option or right to use a pubic adjuster but are rarely, if ever, provided this information from their chosen insurance companies.
Those faced with the required use or where the insurance company has the “option” to utilize a preferred contractor are urged to examine the terms of their existing policies and make changes if they have Preferred Contractor Endorsements, Concierge Program, Select Vendor, Managed Repair, etc. endorsements. Additionally, policyholders should examine their policy to determine if the insurance company has the option to invoke the payout of the insurance company’s contractors’ estimate or cost determination (to complete the repairs); which are never sufficient for the policyholder to fully recover and be made whole again.
Your insurance policy is a contract and by accepting and paying the premiums you have agreed to the terms of the contract or policy. D’Orsa and Associates, LLC will review your current policy and make recommendations (if necessary) at no cost.
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Should your home or business suffer any type of damage, contact D’Orsa and Associates, LLC public adjusters immediately upon discovery of damages. Our adjusters will handle all aspects of your claim from the filing your claim to the ultimate settlement. D’Orsa and Associates, LLC work on a contingency basis: No Recovery, No Fee. For insurance claims help contact (877) 742-3587.