A friend in our church group informed us of a scam following a major fire that destroyed his daughter’s townhouse in rural Maryland. During Thanksgiving weekend last year, a fire started in a neighboring townhouse. The fire department fought down the flames, but not before the smoke and water destroyed 4 other homes in the row, including his daughter’s.
IMMEDIATELY after the fire, a company shows up (name unknown) to offer their services. They informed the 5 homeowners that they shouldn’t talk to their own insurance companies. This company states that they can make sure the homeowners will get fully compensated, and even offer $20,000 up front, AT THE SITE OF THE FIRE.
Two of the five homeowners took the deal. The scam agency offered the same amount as the other agencies: $360,000 flat rate for the structures. However, this is where the scam unfolds.
The 2 homeowners who went with the scam agency find out that they’re locked into using the agency’s own builder. Turns out that this builder can only rebuild the townhouse for $400,000. The other 3 owners are going to get theirs built for much less, including my friend’s daughter. Honestly, it will take under $200,000 to rebuild each townhouse, maybe even much less. There is no way it should cost $400k to rebuild these homes.
UPDATE: I realized I should add that the 2 homeowners signed over Power of Attorney to the scam agency.
So, each of these homeowners will be out $40,000 each, plus the equity they lost by having to pay $400k for a house they originally bought for about $350k. I’m sure they can argue that they were under distress when they made the decision, but had they just gone with their own carrier, they wouldn’t be in this situation.
So the moral of the story is to pick the right insurance company in the first place so you don’t need to question whether they’ll pay up when it counts. You’ll help to avoid a major financial mistake in an emergency.