Should you use your insurer's preferred vendor?

What is an insurer’s preferred vendor?

A preferred vendor is a contractor your insurer has a standing agreement with. When you report a claim, the insurer may offer to send one of its network vendors to dry out the house, tarp the roof or rebuild. You may hear it called a preferred contractor, a direct repair program, a managed vendor network or a managed repair program.

L.E.K. Consulting, which studies the restoration industry, describes these networks as having two to three providers per region. Large insurers formalize the agreements to set pricing and make sure their policyholders get priority service when a disaster hits. L.E.K. says the model, in which insurers refer vendors to customers, was adopted only in the past decade and remains somewhat new.

Many policyholders meet a preferred vendor on the first phone call. R&R Magazine, citing DocuSketch research, reports that 76% of homeowners say they would call their insurance company first after a disaster, and only 12% would call a restoration professional first. That first call is often when a vendor is offered. Knowing your options before you make it helps. For the basics of a water claim, see our water damage claim guide. The hire-a-pro hub covers how to choose any contractor.

Can I refuse my insurer’s preferred contractor?

In most cases, yes. The District of Columbia Department of Insurance, Securities and Banking says a homeowner may select a contractor suggested by the insurer but is not required to, and can choose any contractor to make repairs. United Policyholders, a nonprofit policyholder group, says it is generally up to you to pick who does the actual work.

Many people do decline. L.E.K. Consulting reports that consumers choose a vendor from an insurer’s preferred network only 20% to 50% of the time. That means at least half of policyholders, and often more, pick their own contractor.

There are two important exceptions to check in your policy:

• A managed repair endorsement. Some policies tie your coverage to using the insurer’s network. Declining may lower what the policy pays. The Citizens example below shows how.
• The insurer’s option to repair. Many property policies let the insurer choose to repair the damage instead of paying you. United Policyholders calls this an occasional scenario, not the usual one.

Laws and policy language vary by state. Ask your insurer in writing what changes if you use your own contractor, and keep the reply.

How does a managed repair program work? The Citizens example

Citizens Property Insurance, Florida’s state-backed insurer, runs a well-documented managed repair program. Its 2019 brochure describes how one works, though your current policy terms control over any brochure.

The brochure says participation is optional. But on a large water loss, a $10,000 cap can cost far more than the convenience is worth, or it may not matter on a small one. That is why reading the endorsement matters. Other insurers’ programs have different terms. Ask yours for the program document in writing.

What are the pros and cons of using the insurer’s vendor?

There is no single right answer. It depends on your policy, the size of the loss and the vendor.

Two points apply either way. First, under the DC regulator’s guidance, the contract is between you and the contractor, whoever recommended them. Second, R&R Magazine, citing DocuSketch research, reports that 54% of homeowners believe insurers are not transparent about how claims are calculated. Ask for every scope and estimate in writing so you can see the numbers.

What should I ask before accepting a preferred vendor?

Ask the adjuster and the vendor these questions before work begins. Get the answers in writing, by email if possible.

• Is this program optional under my policy, and what changes in my coverage if I decline?
• Who does the contractor work for: me, the insurer or a third-party administrator?
• Can I see the full written scope of work and estimate before the crew starts?
• Who guarantees the work, for how long, and who do I call if something fails?
• Who collects my deductible, and when?
• If the crew finds hidden damage, who approves the extra work, and how fast?
• Is the contractor licensed in my state for this work? In Florida, mold work over 10 square feet requires a state-licensed individual.
• Will the same company test for mold and remove it? If so, see why assessors and remediators should be separate.
• What happens if I want to switch to my own contractor partway through?

Our list of questions to ask a restoration company covers the rest, and applies to network vendors and independent firms alike.

If I choose my own contractor, how do I protect the claim?

Choosing your own contractor is common, but it puts more of the paperwork on you. United Policyholders says the insurer should pay your chosen professional’s bill, above your deductible and up to your limits, if the professional specifies the materials and tasks in advance and prices the work fairly.

That means a detailed, written, itemized estimate. Line items should show what will be removed and replaced, how much, and at what price. Compare it with the insurer’s estimate line by line. In Florida, the insurer must send you a copy of any detailed estimate within 7 days after the adjuster writes it (Fla. Stat. 627.70131), which makes the comparison easier.

Watch what your contractor promises. In Florida, a contractor may not interpret your policy, advise you about coverage or adjust your claim unless also licensed as a public adjuster, and any repair agreement must come with a good-faith, itemized estimate (Fla. Stat. 489.147). If you want someone to negotiate with the insurer for you, that is a public adjuster or an attorney, not the contractor.

Before anyone starts, check the license and get several bids. R&R Magazine, citing DocuSketch research, reports that 94% of Americans say they would get multiple quotes before choosing a restorer, most often from two or three companies. For the difference between emergency drying and rebuild work, see water mitigation vs. restoration.