Avoid getting burned by these summer insurance scams

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Summer is a time to relax, right? Unfortunately, insurance consumers can’t get too relaxed at the beach ... or in the mountains ... or anywhere else.

During the summer, insurance scammers are on the prowl, looking for their next targets. But there’s no reason to lose sleep over it. Just stick to this advice from Jim Quiggle, director of communications for the Coalition Against Insurance Fraud.

The home contractor scam

After a rainstorm, windstorm or hailstorm wreaks havoc in a neighborhood, shady contractors will start knocking on doors in search of work — work that in many cases is covered by homeowners insurance.

"Most contractors are honest, but unethical storm chasers often are unlicensed and incompetent," Quiggle says. "They may demand a large down payment, then steal your money and disappear after doing little or no work. You’re still left with a gaping roof and months of expensive headaches getting the work done."

Those added expenses can push you past your policy’s limits, leaving you on the hook to cover those costs out of your own pocket.

So, how can you avoid being duped by an unethical contractor?

  • Look for warning signs such as a contractor asking for cash upfront, and a contractor lacking a physical business location or a permanent phone number.

  • Coordinate all of the repair work with your insurance company or agent. Make sure your insurer will cover the repairs and is kept informed as the work continues.

  • Obtain bids from several contractors, and be suspicious of extremely low bids.

  • Before the work starts, sign a contract with the contractor.

  • Ask for proof that the contractor is licensed and insured.

  • Think twice before doing business with a contractor who knocks on your door to get business, and be wary of offers to waive your insurance deductible. This doesn't automatically mean they're not trustworthy, but it's good to be cautious.

The car repair scam

With millions of Americans hitting the road for summer vacations, some are bound to wind up being involved in a car crash.However, motorists who entrust their car repairs to a body shop should choose a reputable one.

"Crooked body shops might do lousy and unsafe repairs using substandard material," Quiggle warns. "You could be over-billed for more damage than was caused. You could be back on the road with an unsafe car."Quiggle says repairs made by a dishonest body shop can max out the limits on your auto insurance policy.Those repairs even can lead to a hike in your auto insurance premiums. How so? An inflated repair bill equals a larger payout from your insurer, Quiggle says. The insurer then could be tempted to raise your premiums because it views you as a high-risk policyholder, especially if you’ve filed previous claims.To steer clear of a shady body shop:

  • Use a body shop on your insurer’s preferred list of repair shops. Your insurer has vetted these shops so that you’ll get a fair, honest repair deal.

  • Compare the repair estimate and the final repair bill. Were any suspicious repairs done that seem out of whack compared with the actual damage?

The crash scam

Speeders, drunk drivers and road ragers aren’t the only motorists you need to worry about on the road this summer. You’ve also got to be on the lookout for crash scammers who are trying to rip off you and your car insurance company.

These scams can take several forms, including:

  • A friendly driver waves you out of a parking space, then suddenly speeds up into your path. You slam into the other car, and the driver of that car fakes whiplash in order to file a phony insurance claim.

  • A car suddenly speeds up and whips out in front of your car. The driver suddenly slams on the brakes, forcing you to rear-end that car. The other car may be packed with passengers who’ve been trained how to fake whiplash injuries.

"Fake whiplash injuries are the whole purpose of setup wrecks," Quiggle says. "Passengers are coached how to act as if they have painful back and neck injuries. They’re sent to dishonest clinics that ply auto insurers with useless treatment. Insurers often pay tens of thousands of dollars for bogus treatment of passengers who only act hurt."

What can you do to prevent – or at least ease – the pain of these scams?

  • Don’t tailgate. Always maintain a safe distance between your car and the car in front of you.

  • If a driver is waving you out of your parking spot, let that driver proceed before you pull away.

  • If you are in an accident, take photos of the scene, including the vehicles, license plates and damage. "You’ll need an accurate record in case the scammers inflate the vehicle damage or claim fake injuries," Quiggle says.

  • Collect the other driver’s license numbers, addresses, phone numbers, insurance details and other information. Also, get names and information of all the passengers. Crash scammers sometimes claim expensive whiplash treatment for more passengers than were actually in their car.

Looking for more ways to protect yourself? Stay up-to-date on the most common money scams so you don’t fall victim to them.

Image: DragonImages