Pro’s and con’s of hiring a “preferred contractor” vs. your own contractor
After a disaster, you may be faced with selecting a contractor to perform the repairs. In some cases your insurance adjuster may recommend one or even bring one with them to provide estimates and/or agree on the scope and cost of the repairs. Some insurance companies have vendors that they like to use on a regular basis and some even have more formal preferred vendor programs where certain contractors will get referred on a regular basis.
Keep in mind that just because a vendor or contractor may be recommended by an adjuster doesn’t necessarily mean that company is the best choice. Once again, selecting the right contractor to work on your home, especially after a disaster is a crucial decision that requires time to do your homework before you sign any contracts.
Here are a few possible benefits of hiring a “preferred” contractor:
- Contractors that are recommended by insurance companies can have a certain level of accountability over them to perform. The idea here is that the contractor may be getting a lot of business from the insurance company and it would be in the contractors best interest to make you a happy customer so they can continue to be recommended.
- In some cases, preferred contractor programs may offer extended warranties for the preferred contractor’s work. However, a warranty is only good as long as the contractor is in business unless the insurance company agrees in writing to stand behind the contractor’s work even if they go out of business.
- Some preferred contractors may be able to handle the entire scope of the restoration versus only the structural repairs. Some preferred contractors may be able to handle everything from the emergency services to handling and/or cleaning of personal property, storing personal property, perform structural drying or deodorization, and the structural repairs.
- Some preferred contractor programs require their vendors to work with estimating guidelines and approved price lists. This can help keep the restoration or repair costs more clearly defined and possibly lower.
- If the preferred contractor has been doing work for the insurance company for a considerable length of time, this may be an indication of stability and a history of serving their clients well.
As with selecting any contractor, the 7 suggestions listed in the previous blog in this series should be considered before hiring any contractor, preferred or not.
Here are a few concerns of hiring a “preferred contractor”:
- Some preferred contractors may be very reluctant to oppose the opinion of an adjuster or stand with a homeowner when it comes to an issue of an item that needs to be replaced versus being cleaned, patched, or repaired. In this kind of situation, a preferred contractor may fear losing favor with the insurance company and may not be willing to take a stand for what needs to be done regardless of the adjusters opinion on the matter. Or they might agree with the adjuster up front until they get the job of actually performing the work, only to change their mind.
- If the preferred contractor is not on a formal approved vendor program but simply a friend or acquaintance of the adjuster, you may not get any real benefit over using another contractor of equal or superior qualifications. The danger here is that there may be a false sense of security created in the homeowner by the preferred contractor simply because he or she was invited by the adjuster.
- In most cases, insurance adjusters are required to write their own estimates. Typically insurance adjusters are not licensed general contractors and do not have the knowledge or hands-on experience building or repairing damaged property. If the adjuster has a preferred contractor with them, they may try and reach an agreed cost or scope of work using that contractor as their “expert” in order to expedite the claim. While most adjusters try to be as thorough and accurate as possible, you should always get more than one opinion as to the scope and cost of the repairs. If for some reason the adjuster underestimates the costs or scope of work, you may not be able to get the repairs done to the quality you expect. In addition, if the estimator for the preferred contractor is inexperienced with the type of work that needs to be done, you could be stuck in a situation where the blind are leading the blind.
- Just because a contractor may be on a preferred vendor program, you still run some of the same risks using them as any other non-preferred or independent contractor. This includes the risks of going bankrupt, doing shoddy work, causing construction defects, not showing up, failing to pay sub-contractors and a host of other less-than-favorable issues. Ultimately it is your choice on who you will have work in your home and if you decide to use a preferred contractor to do the work and they fail to perform you may have no recourse with the adjuster or the insurance company that recommended them.
In my opinion a homeowner should always get at least three estimates from qualified contractors before the cost and scope of work is agreed on. Two of these estimates should be from independent contractors. Once you have a check in hand to get the work started and have thoroughly checked out the contractors being considered, you can then select the contractor you feel is the best choice to work with.