Home improvement scams like contractor scams have become the number one form of fraud in the US, with Americans losing a lot 82 million dollars only from 2020 to 2021.
To combat this, organizations across sectors are working together to try to educate and protect homeowners from these ongoing scams. For example, Central Insurance has an entire team dedicated to identifying, mitigating and preventing insurance fraud. In the same way, groups such as National Insurance Crime Bureau hosting annual informational events such as Contractor Fraud Awareness Week to give homeowners the information they need to stay alert.
While these methods have certainly been effective in training people to recognize the signs of fraud, entrepreneurs are often strategic in choosing their victims, targeting the most vulnerable in hopes of catching them.
In this article, we̵
7;ll go over what these groups look like and how to protect yourself from contractor fraud if you fall into one of them.
What is contractor fraud?
Contractor fraud can take many forms, but at its core, this term refers to a scam that a contractor uses to steal money from a homeowner or the homeowner’s insurance company. These scams can be as simple as overpaying for work, embellishing the scope of the project, or taking a down payment and never returning.
Three most targeted demographics for contractor fraud
Fraudulent contractors know that the community is becoming more aware and informed of their scams, leading many to change their approach and target certain key groups of homeowners to continue scamming people out of their money.
“Contractor fraud affects everyone,” said Jeff Lieberman, Director of Fraud Enforcement and Recovery in the Special Investigations Unit at Central insurance. “But some groups face even more, especially when they are most vulnerable.”
Read more: How Central’s Large Case Program Prevents Insurance Fraud
Below we explore the three most commonly defrauded groups and why they are considered easy targets for contractor fraud.
Group #1: Older
The elderly are common targets for impostor– from cyber threats to credit card fraud. In fact, the FBI estimates that retirees lose more than 3 billion dollars every year to scams like these.
Research shows: The elderly are considered to be goal number one of all insurance fraud in 2023.
There are a few key reasons why the elderly are the most targeted when it comes to insurance fraud. First, scammers believe that older homeowners have a lot of money in the bank, making them good financial targets. They also tend to believe that older generations are not as aware of what is going on in the world, so they may not know how to spot scams with contractors or even that it is something that is happening in society today. Fraudsters also expect that an elderly person will not have the ability or resources to properly report or fight fraudulent allegations.
Did you know: Older homeowners protected by cutting-edge insurance companies like Central never have to worry about personally handling fraud claims because our team of fraud experts have a full system in place to identify and fight fraud.
When it comes to confirming whether or not a contractor they’re dealing with is legitimate, older homeowners should consider these three tailored tips:
- Ask for a copy of the contractor’s license. All contractors in good standing should carry their license and be more than willing to share it with you upon request.
- Ask for a copy of the contractor’s insurance. All contractors should have an up-to-date general liability policy to operate their business. Proof of insurance helps confirm that they are a reputable company.
- Contact your insurance company. If you’ve found a contractor without the help of your insurance company, be sure to let your carrier know who you’re working with before work begins. Advanced operators like Central will be able to run that contractor’s information through ours computer system and provide insight into whether or not they are safe to do business with.
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Group #2: New Home Owners
Unlike the elderly, it is very likely that new homeowners have at least heard about contractor fraud and the impact it has on the community. However, it is equally likely that they did not fully process what they encountered simply because the information did not yet apply to them.
Did you know: This is a common psychological phenomenon called cognitive biasproving that the human brain retains information we can relate to more easily and for longer than information about something we have no connection to.
A new homeowner’s lack of internalized knowledge of contractor scams is just one of the reasons behind their shared approach. New homeowners often don’t know the ins and outs of maintaining a house as well as seasoned homeowners. As a result, fraudulent contractors can more easily claim problems with the home that don’t exist, and charge a higher amount for their work.
To avoid contractor scams, new homeowners should follow these three tailored tips:
- Do your homework. Take a photo of a contractor’s license plate and run it through the National Crime Insurance Bureau’s VINCheck Lookup Tool to see if it links to fraudulent work. Likewise, consider running the contractor’s name through a search engine or checking it with Better Business Bureau to learn about other homeowners’ experiences with the company.
Pro tip: Lieberman also suggests taking “pictures of things like the number of contractor vehicles on site, noting statistics like labor, equipment, etc.” These images will prove extremely useful if a contractor tries to claim that more workers were on site than they actually were.
- Document everything. Given that your new home should be in fairly good condition when you move in, be sure to take photos, videos and measure anything a contractor claims is damaged before they start work. This will help prevent exaggerations of damages and prove what was actually done in case they overcharge you.
- Hire your insurance company. Your insurance company can match you with a reputable contractor at the first sign of damage. If you’ve already hired another group for work, advanced operators like Central can do your homework for you and run their names through our advanced data model to see if there are any past scams or if you are safe to proceed with them.
Group #3: Homeowners in recently damaged areas
Believe it or not, fraudulent contractors are known to chase storms across the country, preying on homeowners who have recently suffered a major loss.
“Storm chasers are driving all over the country looking for people to target,” says Lieberman. “It’s so easy for them because their business can just be mobile. There’s no overhead; they don’t need an office; all they need is a truck and a trailer. So they have the ability to go where the action is.”
Did you know: Contractor fraud can account for as much as 10% of catastrophe losses.
Properties can suffer a variety of serious damages after natural disasters. While fraudulent contractors may not as often target people who have lost their entire home in floods or earthquakes, they are likely to target people who have damage to large portions of their existing structure due to severe weather such as hurricanes, blizzards and tornadoes.
Remember: The most common area of a home that fraudulent contractors target after a disaster is the ceiling. This area is often expensive to repair and difficult to access, making it easy for fraudsters to lie about or add to existing damage without the homeowner’s knowledge.
These homeowners should follow these specific tips to protect themselves from fraudulent contractors:
- File a claim at the first sign of damage. This ensures that your operator gets the most accurate picture of the work needed. From here, you can use your carrier to find a contractor, or if you decide to find one on your own, you can cross-reference their suggested rates and scope of work based on what the carrier estimates to avoid being ripped off.
- Be wary of contractors contacting you. Fraudulent contractors have been known to knock on your door or leave a flyer in your mailbox offering to repair or replace exterior areas of your home, such as your roof. Instead, look for contractors on your own or with the help of your insurance company.
- Always ask for a contract. It is important that you ask about everything the contractor plans to do in writing, especially for larger projects. Make sure to keep a copy of the contract on file and never sign contracts with forms.
Top Insurance Fraud Warning Signs for All Homeowners
While the elderly, new homeowners, and those in recently damaged areas may be among the most common targets of fraudulent contractors, the truth is that all homeowners are at risk. For that reason, it is important to remember the main warning signs you are being scammed and commit them to memory.
In addition to the tips above, Lieberman highlights some additional advice for homeowners.
- Read through each document carefully before signing and only sign if you understand.
- Avoid signing an Assignment of Benefits (AOB) document. “There’s a lot of fraud that goes into AOBs because these documents allow the contractor to step into the shoes of the insured,” Lieberman says. “In these cases, the insured basically signs over all of his rights to his claim to the contractor, so the contractor has the right to negotiate with the insurance company.”
- Follow your instincts. “If you feel like something isn’t right, report it to your insurance company,” says Lieberman. “Better to check than regret not asking.”
- When in doubt, get a referral. Buying your contractor through your insurance company ensures that you are working with a reputable company.
- Get advanced insurance coverage. Work with an operator like Central to access industry-defining fraud detection software which helps prevent and mitigate cases of insurance fraud.
Take the next step
If you or a loved one falls into one of the most commonly targeted demographics for contractor fraud, take steps today to protect yourself, then contact a central agent today to see if our coverage options are right for you.

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