Home improvement scams like contractor frauds have become the top form of fraud in the United States, with Americans losing a whopping $82 million from 2020 to 2021 alone.

To combat this, organizations across sectors are collaborating to try and educate and protect homeowners from these ongoing scams. Central Insurance, for instance, has an entire team dedicated to identifying, mitigating, and preventing insurance fraud. Similarly, groups such as the National Insurance Crime Bureau host annual awareness events like Contractor Fraud Awareness Week to provide homeowners with the information they need to stay alert. 

While these methods have certainly been effective in training people to recognize the signs of fraud, contractors are often strategic in choosing their victims and target those most vulnerable in hopes of catching them off guard.

In this article, we review what these groups look like and how to protect yourself from contractor fraud if you fall within one of them.

What is contractor fraud?

Contractor frauds 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 over-charging for work, embellishing the extent of the project, or taking a downpayment and never returning.

Three Most Targeted Demographics for Contractor Fraud

Fraudulent contractors know that society is becoming more aware and informed about their scams, leading many to shift their approaches and target certain key groups of homeowners to continue cheating people out of their money.

“Contractor fraud affects everybody,” says Jeff Lieberman, Director of Anti-Fraud and Recovery within the Special Investigations Unit at Central Insurance. “But certain groups are preyed upon even more so, especially when they’re the most vulnerable.”

Learn More: How Central’s Major Case Program is Preventing Insurance Fraud

Below, we explore the three most commonly scammed groups and why they are considered easier targets for contractor fraud.

Group #1: The Elderly

The elderly are common targets of scammers—from cyber threats to credit card fraud. In fact, the FBI estimates senior citizens lose more than $3 billioneach year to scams like these.

Research Shows: The elderly are considered the number one target of all insurance fraud scams in 2023.

There are a few key reasons the elderly are the most frequently attacked when it comes to insurance fraud. First, fraudsters think older homeowners have a lot of money in the bank, making them good financial targets. They also tend to believe older generations aren’t as aware of what’s happening in the world, so they might not know how to spot contractor fraud or even that it’s something occurring in society today. Scammers also expect an elderly person won’t have the ability or resources to properly report or fight fraudulent charges.

Did You Know: Elderly homeowners protected by cutting-edge insurance carriers like Central never need to worry about personally handling fraud claims because our team of fraud experts has an entire system in place to identify and fight fraud.

When it comes to confirming whether or not a contractor they’re dealing with is legitimate or not, elderly homeowners should consider these three tailored tips:

  1. Ask for a copy of the contractor’s license. Any contractor in good standing should carry their license on them and be more than willing to share it with you upon request.
  2. Ask for a copy of the contractor’s insurance policy. All contractors should have an up-to-date general liability policy to operate their business. Proof of insurance helps confirm they’re a reputable company.
  3. Get in touch with your insurance carrier. If you’ve found a contractor without the help of your insurance carrier, be sure to inform your carrier who you’re working with prior to beginning the work. Advanced carriers like Central will be able to run that contractor’s information through our data systemsand provide insight into whether or not they are safe to do business with.

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Group #2: New Homeowners

Unlike the elderly, it’s very likely new homeowners have at least heard about contractor frauds and the impact they’re having on society. However, it’s just as likely they didn’t fully process what they encountered simply because the information did not yet apply to them.

Did You Know: This is a common psychological phenomenon known as cognitive bias, which proves that the human brain retains the information we can relate to more easily and for longer periods of time than information about something we have no connection to.

A new homeowner’s lack of internalized knowledge about contractor scams is only one of the reasons behind their common targeting. 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 fraud, new homeowners should follow these three tailored tips:

  1. Do Your Homework. Take a photo of a contractor’s license plate and run it through the National Crime Insurance Bureau’s VINCheck Lookup toolto see if it links to fraudulent work. Similarly, consider running the contractor’s name through a search engine or checking it with the Better Business Bureauto 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 metrics like manpower, equipment, etc.” These photos will prove incredibly helpful if a contractor tries to claim more workers were on-site than actually were.

  1. Document Everything. Considering your new home should be in fairly good condition upon move-in, be sure to take photos, videos, and measurements of anything a contractor claims is damaged prior to them beginning work. This will help prevent exaggerations of damage and prove what was actually done in case they overcharge you.
  2. Engage Your Insurance Carrier. Your insurance carrier can match you with a reputable contractor at the first sign of damage. If you’ve already engaged another group for work, advanced carriers like Central can do your homework for you and run their name through our advanced data model to see if there are any past occurrences of fraud or if you’re safe to move forward with them. 

Group #3: Homeowners in Recently Damaged Areas

Believe it or not, fraudulent contractors are known for chasing storms across the country and preying on homeowners who have recently suffered a large loss. 

“Storm chasers drive all over the country seeking out people they can target,” Lieberman says. “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 experience a slew of severe damages after natural disasters. While fraudulent contractors may not as frequently 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 like hurricanes, blizzards, and tornados.

Keep in Mind: The most common area of a home that fraudulent contractors target after a disaster is the roof. This area is often expensive to repair and hard to access, making it easy for scammers to lie about or add to existing damage without the homeowner knowing. 

These homeowners should follow these specific tips to protect themselves from fraudulent contractors:

  1. File a claim at the first sign of damage. This ensures your carrier is getting the most accurate picture of work needed. From here, you can use your carrier to help locate a contractor, or if you decide to find one on your own, you can cross-reference their proposed rates and scope of work based on what the carrier estimates to avoid being scammed.
  2. Be wary of contractors initiating contact. Fraudulent contractors are known to knock on your door or leave a flyer in your mailbox offering to repair or replace external areas of your home, like your roof. Instead, seek out contractors on your own or with the help of your insurance carrier. 
  3. Always ask for a contract. It’s vital you ask for everything the contractor plans to do in writing, especially on larger-scale projects.. Make sure to keep a copy of the contract on file and never sign contracts with blanks.

Top Warning Signs of Insurance Fraud for All Homeowners

While the elderly, new homeowners, and those in recently damaged areas may be among the most common targets for fraudulent contractors, the truth is all homeowners are at risk. For that reason, it’s important to remember the key warning signs you’re being scammed and commit them to memory. 

Alongside the tips outlined above, Lieberman emphasizes a few more pieces of advice for homeowners.

  1. Read through every document thoroughly before you sign and only sign if you understand it.
  2. 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 insured’s shoes,” Lieberman says. “In these cases, the insured is basically signing all of their rights to their claim over to the contractor, so the contractor has the right to negotiate with the insurance company.” 
  3. Follow your instincts. “If you feel something’s not right, report it to your insurance company,” Lieberman says. “It’s better to check than to regret not asking.”
  4. When in doubt, get a referral. Sourcing your contractor through your insurance carrier ensures you work with a reputable company. 
  5. Get advanced insurance protection. Work with a carrier like Central for access to industry-defining fraud detection programs that help prevent and mitigate cases of insurance fraud. 

Take the Next Step

If you or a loved one fall into one of the commonly targeted demographics for contractor fraud, take the steps today to protect yourself, then get in touch with a Central agent today to see if our coverage options are right for you.


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