A "Free Roof". Is it Illegal?
Updated: Jan 6
You've probably heard about people getting a "free roof". Usually you'll hear these claims when your neighborhood is impacted by strong winds or hail damage. A roofing company might try to increase their sales by promising the homeowners a "Free Roof". What about the deductible?
All Types of Insurance Policies have Deductibles?
There is typically always a deductible when any type of insurance claim if made. Car insurance, health insurance, and homeowners insurance all have deductibles. When we go to the doctor we never think about getting out of paying the deductible. Yet, how is it some homeowners think they don't have to pay their deductible on home insurance?
Why is it some roofers claim they will "absorb", "eat", or "waive" the homeowner's deductible? First things first, that is illegal in most states, including Georgia. If you ever hear a roofing company say they can "absorb" your deductible, or they offer you a "free roof", we recommend running! Shady business practices are often a sign of poor workmanship and poor business management.
How Insurance Works!
Let's explain how insurance works, to get the big picture. When a homeowner gets an insurance policy, they are entering into a contract with the insurance company. Basically they are making regular payments, known as premiums, in return of coverage in case of loss. Insurance companies make money by insuring lots of homeowners and hoping that only a small amount of those people will actually make a claim. They want to make more on premiums, than the amount they pay out. Thus, insurance companies will determine how likely it is for a certain customer to make a claim. Then the insurance company sets premium rates accordingly. This works, but if people disrupt the model, then the insurance companies start to loose money. Insurance companies do what they can to help make premiums lower. One of the ways, is to reduce the amount that the insurance company will pay out on a claim. This is done by something called, Risk Sharing. Risk Sharing is accomplished by charging a deductible. If the customer agrees to cover part of the damages, by paying a portion of the claim, the deductible, the insurance company assumes less risk. When risk are lower so are the premiums. Deductibles also help minimize the insurance companies risk, by decreasing the chance a homeowner will file lots of small claims.
"WAIVED" Deductibles aren't legal.
Here is a little background. Up until recently, a roofer "waiving" the deductible was a common and rather acceptable practice. That's before insurance companies changed how they payout claims. In the past, when a homeowner had damage to their roof, the insurance would send out an adjuster. The adjuster would estimate the damages and then write a check to the homeowner for the total amount, minus the deductible. Example: Let's say the total damage would cost $10,000 to fix or replace the roof. The homeowner has a $1,000 deductible, the adjuster would write a check for the total amount of $9,000, right then and there. That's it, the homeowner could then do what they wanted with the $9,000. This isn't how it works today.
Today, insurance companies don't give an upfront total payment to the homeowner. Rather, they have a Replacement Cost Value. The insurance will pay for the total,minus the deductible. But not all at once. Instead, the checks will usually come in two separate payments. Example, once again, let's say the total damage would cost $10,000 to fix or replace the roof, and the homeowner has a $1,000 deductible. This leaves a claim amount paid by insurance of $9,000. Now, the adjuster will only release a portion upfront. This is known as depreciation. Depreciation is based on the age of the roof. In our current example, this first check equals only $6,000. What about the the other $3000?
How To Get The Final Check.
The remaining balance of the $9000 due from the insurance is $3000. This will be paid when and only when both of the following have occurred.
The roof work is totally completed as laid out on the insurance adjusters estimate and scope.
The Contractors invoice, totaling the full amount of $10,000 for the roof, is submitted to the insurance, along with a completion of work.
The insurance company will then release the second check ($3,000).
Lower Bids Can't Save You Money.
When it comes to insurance, lower bids can't save you money. If a homeowner finds a roofing company to do the work for $9,000. The homeowner will still have to pay their $1000 deductible. Here's Why: In our example, the final check is suppose to be for ($3000). Remember, the final check the insurance agreed to pay, was under the contingency, that the homeowner would get the roof work (or whatever work is listed in the scope from insurance) done for the full amount. ($10,000.) However:
If the homeowner gets the Roofing work contracted for $9,000, the final check from the insurance will only be for $2,000. Leaving the homeowner to pay the roofing company the remaining $1,000.
If the homeowner gets the Roofing work contracted for $8,000, the final check from the insurance will only be for $1,000. Leaving the homeowner to still pay the roofing company the remaining $1,000.
The lower the bid doesn't benefit you. If anything, the lower bid encourages the contractor to use inferior labor, inferior materials, and to cut corners
Why Some Roofers Still Offer To "Waive."
The only way around the deductible, is for the roofer and the homeowner to submit a false or fake contract/invoice to the insurance company. Also known as, insurance fraud. It is illegal for the roofer to "pay", "waive", "absorb" or "eat" your deductible.
GA House Bill 423 States it is unlawful to:
"Advertise or promise to pay or rebate all or any portion of any insurance deductible. As an inducement to the sale of goods or services. As used in this subsection, the term promise to pay or rebate’ includes (A) granting any allowance or offering any discount against the fees to be charged, including, but not limited to, an allowance or discount in return for displaying a sign or other advertisement at the insured’s premises, or (B) paying the insured or any person directly or indirectly associated with the property any form of compensation, gift, prize, bonus, coupon, credit, referral fee, or another item of monetary Value for any reason."
Law Summary. A roofing company can not give any monetary incentive for you use to use them over another contractor. This would even include free items or upgrades.
The roofing company may try to justify this a few different ways.
The roofing company may offer a $1,000 credit for letting them place a sign in your yard for a certain amount of time. That still means the roofing company is only charging $9,000 for the roofing work performed. And then essentially giving a $1,000 value to advertise. Any honest roofing company when submitting the contract or invoice, would have to mention that arrangement, and no insurance company would ever pay $1,000 for the contractors advertising.
The roofing company may even try to get you fill out a referral sheet, with your friends and family's phone numbers. Then offer you $100 a piece for 10 of them. Once again this would need to be reflected on the invoice and contract sent to the insurance company. Failure to do so is, insurance fraud. Obviously, when mentioning that on the invoice, the insurance would never pay for the contractor to have referrals given.
The roofing company might tell you to pay the $1,000 deductible, but then offer you gift cards, once everything is done. Perhaps for leaving reviews online. This would of course need to be mentioned in the invoice and contract sent to the insurance company. When mentioning that on the invoice, the insurance would never pay for you to get gift cards.
The roofing company might even offer to bake you $1,000 worth of cookies or to install $1000 worth of gutters or include flooring or include painting or something else as a free add on. Again, that would have to be mentioned in the invoice and contract. The insurance would never pay for you to get cookies or pay for gutters that aren't damaged from the storm.
No matter the incentive, a contractor can in no way give incentives, that help the homeowner pay less, make money, or deviate where the money goes.
If you find a company willing to do any of the things above, beware. If you find a company that says they will install gutters for free, beware. Besides it being illegal, consider this: Insurance companies already pay as little out for claims as possible. They pay below retail value for roofs. A contractor isn't going take money out of their profits, but rather, they will cut corners to make up the profits lost. If you gain "free gutters", you are gonna be loosing somewhere else. If a roofing company is willing to cheat your insurance company by committing insurance fraud, they are probably willing to cheat you too. If you find a company that says they will install gutters for free, beware.
It's not just the roofing company risking it all. The fraud is also a breach of contract between the homeowner and the insurance company. If this contract is breached, there will be no payment. and this could follow you around even if you try to switch insurance companies. The terms of the contract agree that the homeowner will pay the full cost of repairs needed (repairs covered by the storm claim) and return any unused money back to the insurance company
FOOD FOR THOUGHT
Many roofing contractors that do insurance roofing work rely on insurance companies to stay in business. The roofing companies that plan to stay in business, aren't going to bite the hand that feeds them. If you find one that will, then that company is likely one that doesn't care about the quality of your roof work and doesn't plan to be in business for long. If you want a reputable roofing contractor, don't use a company willing to break the laws. It's putting you and themselves at risk. Call SGR Contracting & Roofing LLC for an honest job. We work with insurance companies all the time and can help walk you thru the entire process. We never offer anything free. We never pay Deductibles. SIMPLE. HONEST. ROOFING.
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