As homeowners are trying to restore their homes in the aftermath of Hurricane Irma, many insurance companies are suggesting the repairs be done by their Preferred Providers. But just who are these people, why are they preferred, and is a homeowner required to use them?
Preferred Providers
Preferred, by definition, means to like one thing better than others. So why do insurance companies have a list of contractors they like better than others? Contractors who make it onto a Preferred Provider list have usually agreed to certain fee schedules [often agreeing to accept less than the average contractor] in exchange for the insurance company sending them a volume of work. While there is nothing inherently wrong with such vendor agreements, there are certain things that a homeowner should consider when deciding whether to use a contractor preferred by the insurance company.
Am I required to use a Preferred Provider?
The insurance company cannot require a homeowner to use their Preferred Providers. There is nothing in your homeowners policy requiring you use a certain vendor. It is the homeowners choice who to hire.
Who does the Preferred Provider work for?
If a homeowner opts to use a Preferred Provider, they have to hire them by signing a contract [just like a homeowner signs with any other contractor], then the homeowner pays them directly. Officially, the Preferred Provider works for the homeowner, but unofficially, do they really? When you consider that often times Preferred Providers get up to 90% or more of their work from insurance companies, where is their allegiance? If a Preferred Provider wants to stay in a companys good graces, assuring themselves a continuous stream of work, will they really fight for the homeowner if the insurance company wants to cut corners on the scope of work? Or, is such a vendor more likely to roll over and appease the insurance company at the expense of the customer, the homeowner? In my opinion, the real customer is the insurance company.
Tips for homeowners
While there are many reputable contractors on preferred vendor lists, I advise clients to hire these companies with caution. Follow the tips below if a Preferred Contractor is recommended to work on your home.
- First and foremost, know that it is your decision who to hire. Nothing in your insurance policy requires you to use a certain company or person.
- Get estimates from more than one contractor, even if you plan to use a Preferred Provider. Compare the scope of work on each estimate to see if the Preferred Provider is including everything that the independent contractors have in their estimates.
- If you are considering using a Preferred Provider, do your homework into the companys background, warranties and customer reviews before you sign that contract.