Companies in the insurance-related restoration industry would like to think that this industry is recession proof. After all, water damage, fires and natural disasters will continue to happen regardless of the economy. As long as there are insurance companies who have been pre-paid to cover these property claims, there will always be business. Even in past economic hardship times, the restoration industry thrived and continued to grow.

Times are different now. Many homes have negative equity-especially in the states that wrote several sub-prime mortgages. Numerous people have lost their jobs or are at risk of losing their jobs. In regards to property damage claims, many homeowners are leveraged by so much debt that some are finding it more beneficial to cash out rather than to hire a restoration company. The intention behind cashing out is generally to do the repairs by themselves, hiring a handy man or a skilled tradesman-all for a cheaper price. Homeowners are pocketing the so-called savings and paying off some of their debts-which unfortunately, is sometimes just a short-term solution because of additional complications arising due to insufficient repairs.

When a homeowner does sign a contract with a restoration company to do repair work, most restoration companies would start the job by collecting the deductible. However, contractors are finding that many clients cannot afford their $1,000 deductibles. In fact, some insurance company adjusters are asking contractors to wait on collecting the deductibles in order to help the homeowner who has just suffered a property disaster. After the mitigation and reconstruction are started and completed, the restoration company will usually bill for their services. Hopefully, the homeowner has held on to a check written in their name and possibly their mortgage company from their insurance provider. If the contractor is lucky, the insurance company has acknowledged the contractor’s interest in the claim and listed them on the check as well; however, many collection issues are being discovered by restoration companies, such as:

• the money was held by the mortgage company because the homeowner was in default on their loan;
• the homeowner cashed the check and paid off some bills;
• the money was garnished by a debt collector who had won a judgment against the homeowner;
• the house is in foreclosure;
• the homeowner is holding on to the money and wants to negotiate a lower settlement amount with the contractor.

As it would be nice to use any incoming funds to pay off existing debts or to purchase additional products/services, the distinction between being awarded insurance money and winning the lottery needs to be acknowledged. The monetary amount agreed upon by the insurance company and the restoration company is the reasonable amount needed to complete the repair work. When a contractor is given only a portion of the insurance money or none at all, the imposed strain on the contractor is apparent.

So, how can these issues be confronted in order to protect everyone’s stake? Simply put, stronger collaborations between businesses should be implemented. Insurance companies and restoration companies share similar goals: to restore the client’s property to pre-loss condition in the most cost-effective and efficient manner. In trying to protect financial interests, restoration companies need to be more prudent in tracking money from the beginning. Being more prudent may mean running a credit check (with proper authorization from the homeowner) or researching if the property is in foreclosure. When the green light is given and the contract is signed by the homeowner, a signed “Direction of Payment” needs to be sent to the insurance company. Adjusters also play a crucial role in the collections process. If an adjuster sees that a restoration company has signed a contract with the homeowner, the adjuster can list the contractor’s name on the payment draft as this protects all who are involved and keeps everyone’s interest protected. When money can be given to where it is due, serving clients to the best extent possible will be easier for all. Small and big restoration companies and contractors will be able to continue providing their services and survive through the economic hard times.

About NuBilt's President

Issa Ashour

Issa Ashour, President of NuBilt Restoration & Construction, co-founded the property restoration company back in 1994. Since then, the company has successfully restored 1000's of properties.Connect with Issa on Google+.

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