Maximizing Insurance Billing: Strategies For Savvy Contractors

When disaster strikes, your first concern is restoring your home to its previous state. This involves contacting your insurance company to find out whether the property damage is covered and how to file a claim. Once your claim is underway, you can start fixing the damage. This is when you'll need to call in a contractor.

There are two types of contractors that can help: restoration contractors, who address immediate issues, and general contractors, who handle the subsequent rebuilding phase. Restoration contractors are trained and experienced in performing the mitigation work needed to address the issue and prevent further damage. They are generally available at short notice and have the necessary equipment and certifications to do such 'hazardous' work as removing mould, asbestos, or lead paint. General contractors, on the other hand, specialise in major projects and will perform the rebuilding work to a higher quality standard.

When it comes to billing insurance as a contractor, it's important to be aware of the insurance company's payment process. The insurance company may pay the contractor directly, or they may send a check to the homeowner, who will then pay the contractor. It's rare for the homeowner to handle a contractor invoice for an insurance claim.

Ask for a written estimate from the contractor, including costs for labour, supplies and other expenses

When hiring a contractor, it is essential to get a written estimate to understand the expected costs of the project. This estimate should include the costs for labour, supplies, and any other relevant expenses. Here are some detailed steps and considerations to help you obtain a comprehensive written estimate:

Request a Detailed Breakdown:

Ask the contractor for an itemised schedule of works, outlining the costs for each item or service. This should include materials, labour, and any other expenses such as skip hire or subcontractor fees. Ensure that the contractor provides a clear description of the work they will be doing, specifying what constitutes a completed project.

Compare Multiple Estimates:

Before making a decision, it is advisable to obtain estimates from at least three contractors. This allows you to compare not only the overall cost but also the project scope and timeline. By gathering multiple estimates, you can identify potential discrepancies and ensure you are getting a fair deal.

Verify Credentials and Experience:

Ask the contractor about their credentials, such as licensing, insurance, and trading experience. Inquire about their payment terms, including deposit requirements and payment plans. Also, don't hesitate to request references from past clients to get a sense of their work quality and timeliness.

Understand the Difference Between an Estimate and a Quote:

Keep in mind that an estimate is the contractor's professional assessment of the expected costs, which may be subject to change. A quote, on the other hand, is a fixed offer to enter into a contract with little room for deviation. While both should ideally be in writing, only a quote represents a binding agreement.

Discuss Potential Cost Overruns:

Ask the contractor if they anticipate any problems or possible cost overruns. This shows your engagement with the project and helps set the right expectations. It also demonstrates your awareness of potential issues, which can strengthen your position if unexpected costs arise.

Clarify Payment Terms:

Understand the payment terms outlined in the estimate. Contractors typically request a partial payment upfront, ranging from a third to half of the total cost. Be clear about when the final payment is due and any late payment penalties that may apply.

Review and Negotiate:

Once you receive the written estimate, review it thoroughly. If you have concerns about the pricing, don't hesitate to negotiate. You can politely inquire about the possibility of using more affordable materials or discuss potential substitutions to reduce costs. Remember to approach this conversation respectfully, maintaining a positive rapport with the contractor.

By following these steps, you can make an informed decision about hiring a contractor and ensure that the project aligns with your budget and expectations.

Ensure the contractor has a licence and insurance

When hiring a contractor, it is essential to ensure they have the necessary licence and insurance to protect yourself and your property. Here are some detailed steps to verify a contractor's licence and insurance:

• Check with Local Authorities: Contact your local licensing board or department to verify the contractor's licence. In the US, licensing requirements vary by state and even by city or county. For example, in New Jersey, you can check with the Division of Consumer Affairs, while in Alabama, the licensing authority is the Alabama Licensing Board for General Contractors.
• Request Licence Number and Proof of Bonding: Ask the contractor for their licence number and proof of bonding or insurance. A licensed contractor has typically registered with the relevant agency and holds the required insurance or bonding.
• Verify Insurance: Ask for a certificate of insurance and contact the insurance provider to confirm that the policy is valid and covers the type of work being undertaken. It is also essential to ensure the contractor has liability insurance to protect your property and workers' compensation insurance to cover any injuries to the contractor or their employees.
• Check for Bonding: Ask for the bond number and certification, and verify with the surety company. A bond protects you if the contractor fails to complete the job, doesn't pay subcontractors, or causes damage to your property.
• Online Resources: Utilise online resources such as the Better Business Bureau (BBB) or websites like Billy.com, which provide information on contractor licensing, insurance, consumer ratings, and reviews.
• References and Recommendations: Ask friends, family, or neighbours for references and recommendations. They can share their experiences with contractors and provide valuable insights.
• Proof of Specialisation: If your project requires specialised work (e.g., electrical, plumbing), ensure the contractor has the appropriate licence and insurance for that specific trade.
• Contractor Estimate: Obtain a detailed written estimate from the contractor, outlining the costs of labour, supplies, and other expenses. This will help you assess their professionalism and expertise.
• Experience and Qualifications: Inquire about the contractor's experience and qualifications. Ask if they have handled similar repairs or projects in the past and if they have expertise in dealing with property damage issues.
• Payment Schedule: Establish a clear payment schedule with the contractor to avoid potential issues. Be cautious if a contractor requests a large down payment upfront.

By following these steps, you can ensure that the contractor you hire is licensed, insured, and qualified to perform the work, protecting yourself and your property throughout the project.

Check the contractor's experience and qualifications

When hiring a contractor, it's important to check their experience and qualifications. This is because contractors with more experience and qualifications are better equipped to handle repairs and renovations, ensuring quality work that meets your needs and specifications. Here are some key considerations when evaluating a contractor's experience and qualifications:

• Years of Experience: Most states require contractors to have a certain number of years of experience to obtain a license. While the specific requirements vary by state, aiming for contractors with at least four years of experience is a good starting point. This ensures they have a solid understanding of the construction process and can handle any challenges that may arise.
• Education and Training: Contractors should have relevant education and training in the field. This could include technical training, apprenticeship programs, or even a degree in construction management. A combination of experience and education is ideal, as it demonstrates a strong foundation of knowledge and skills.
• License and Certifications: Verify that the contractor has the necessary licenses and certifications to operate in your state. Each state has its own licensing requirements, so check with your local licensing board. Also, ensure that their licenses are up to date and valid for the specific trade you need.
• Specialty and Trade Experience: Different construction projects require different skill sets. For example, if you need electrical work, ensure the contractor has experience in that specific trade. Ask about their track record in similar projects and repairs.
• References and Reviews: Don't hesitate to ask the contractor for references from past clients. Contact these references to get first-hand accounts of the contractor's work quality, timeliness, and professionalism. Additionally, check online reviews to gain insights from a wider range of customers.
• Proof of Insurance: Reputable contractors should carry liability insurance to protect themselves and their clients in case of accidents or unexpected events. Ask for proof of insurance to ensure you're covered in case of any issues during the project.
• Written Estimates: Before hiring a contractor, obtain a detailed written estimate outlining the costs of supplies, labour, and other expenses. This will help you compare different contractors and ensure there are no hidden charges.
• Schedule and Timeframe: Discuss the expected completion date and the timeframe for the work. Be wary of contractors with vague timelines, as they may rush through the job or fail to complete it properly. A clear and realistic schedule is a sign of a well-organised contractor.

Remember, it's your right to select your own contractor, and you should never feel pressured to choose a particular contractor. Taking the time to thoroughly vet their experience and qualifications will help ensure a positive experience and reduce the risk of scams or subpar work.

Understand the insurance company's payment process and communicate it to the contractor

Understanding the insurance company's payment process and communicating it to the contractor is crucial for ensuring smooth transactions and timely repairs. Here are some key points to consider:

Payment Process Overview:

Firstly, familiarize yourself with the insurance company's standard payment process for claims. This includes understanding if they typically issue checks directly to the contractor or the homeowner. For example, insurance companies often make payments directly to the contractor, especially if the contractor provides a ""direction to pay" form. On the other hand, they may also send a check to the homeowner or mortgage lender, who then manages the payments to the contractor.

Communicating with the Contractor:

Inform your chosen contractor about the insurance company's payment process. Ensure they are aware of when and how they can expect to receive payments. This information should be detailed in the written construction agreement between you and the contractor. If the insurance company plans to pay the contractor directly, they will likely notify you and request your agreement for each payment. Carefully review these payment requests to ensure they align with the contractor's progress.

Estimates and Bids:

Obtain detailed estimates from the contractor outlining the costs of supplies, labor, and other expenses. Communicate these estimates to the insurance adjuster, who will guide you through the process and help determine the scope of work they will approve. If there is a discrepancy between the contractor's estimate and the adjuster's evaluation, discuss how to bridge the gap. You may need to negotiate with the contractor or obtain additional estimates.

Guarantees and Rights:

Ensure you obtain all guarantees regarding the contractor's work in writing. If the insurance company chooses the contractor, they should guarantee their work. Additionally, be cautious when signing any "assignment of benefit" forms, as these may impact your rights by allowing the contractor to negotiate and settle the claim directly with the insurance company without your approval. Understand your rights by consulting your agent or insurance company before signing such forms.

Overhead and Profit Expenses:

Understand that contractor expenses, often referred to as Overhead and Profit (O&P), are legitimate costs that you, as the policyholder, are typically entitled to recover. O&P covers the contractor's overhead, operating costs, and profit. While insurance companies may initially balk at paying O&P, it is essential to include these costs in the payment for repairing or replacing damaged property.

By following these steps and maintaining open communication between all parties, you can effectively manage the insurance company's payment process and keep your contractor informed, facilitating a smoother and more efficient repair process.

Keep detailed records, including contracts, plans, payment records and insurance communications

Keeping detailed records is essential when billing insurance as a contractor. This includes maintaining organised files of contracts, plans, payment records, and insurance communications. Here are some crucial aspects to consider:

• Contracts and Agreements: Keep a copy of all signed contracts and agreements with clients, subcontractors, and suppliers. These documents outline the scope of work, payment terms, and insurance requirements.
• Plans and Specifications: Maintain detailed plans and specifications for each project. This includes architectural drawings, engineering reports, and any change orders or variations during the project.
• Payment Records: Keep a meticulous record of all payments made and received. This includes invoices, receipts, and proof of payment, such as bank statements or cancelled cheques. Ensure you record the date, amount, and purpose of each transaction.
• Insurance Communications: Document all communications with insurance companies and brokers. This includes emails, letters, phone calls, and meetings. Note the date, participants, and key discussion points of each interaction. Additionally, keep copies of all insurance policies, certificates of insurance, and claims-related correspondence.
• Project Documentation: Gather and store all relevant project documentation, such as site photographs, progress reports, and delivery dockets. This helps substantiate your work and can be crucial in the event of a dispute or insurance claim.
• Employee and Subcontractor Records: Maintain records of your employees' and subcontractors' insurance coverage, including workers' compensation and liability insurance certificates. Also, keep timesheets, payroll records, and any other documentation related to their work on the project.
• Equipment and Material Records: Keep records of equipment rentals or purchases, material orders, and delivery receipts. This helps in tracking costs and can be important for insurance and tax purposes.
• Permits and Licenses: Ensure you have copies of all relevant permits and licenses for the project. This demonstrates compliance with regulatory requirements and can be crucial in the event of an audit or inspection.
• Warranties and Guarantees: Obtain and retain copies of any warranties or guarantees provided by manufacturers, suppliers, or subcontractors. These documents may be necessary for insurance claims or future repairs.
• Site Meetings and Inspections: Document all site meetings, progress inspections, and handover inspections. Record the date, attendees, and key discussion points of each meeting. This helps ensure everyone is on the same page and can aid in resolving any disputes that may arise.

By maintaining comprehensive and well-organised records, you can efficiently manage your projects, quickly resolve any issues, and confidently support any insurance claims or billing inquiries.

Frequently asked questions