BBB Warns Against Insurance Deductible Rebates

  
     
June 26, 2017

With the recent severe weather, many Minnesota homeowners are looking to their insurance policies to cover the costs of repairs to their homes. Better Business Bureau (BBB) wants to make sure Minnesota homeowners are aware of a rule to protect them when they begin the process of finding a contractor to make repairs.

In particular, BBB and the Minnesota Department of Labor and Industry (DLI) want to alert consumers about a Minnesota law enacted in 2010 that prohibits contractors from advertising or promising to pay or rebate all or part of any applicable insurance deductibles.

“This law protects consumers and insurance companies from contractors who might inflate repair costs in order to pay the homeowner’s deductible,” said Charlie Durenberger, Manager of Licensing and Enforcement Services in DLI’s Construction Codes and Licensing Division.

The practice of contractors artificially increasing the price charged to the insurance company to cover homeowners’ deductibles – would ultimately lead to rising costs of homeowners insurance for all consumers. Under the 2010 law, DLI has broader powers to enforce this provision.

Contractors who are found to have offered to pay or rebate a homeowner’s insurance deductible can face a number of penalties, including suspension or revocation of their contractor’s license and a fine of up to $10,000. Before you hire a contractor, be sure to ask for their license number and then contact the Department of Labor and Industry at (651) 284-5069 or 1-800-342-5354 to verify the contractor is currently licensed, and also to find out if they have a disciplinary history.

“BBB is always monitoring the marketplace for questionable business practices,” said Susan Adams Loyd, President and CEO of BBB of Minnesota and North Dakota. “We feel it’s of vital importance to help educate the public on matters such as this and encourage consumers to make principled decisions based on facts.”

Homeowners need to know they are responsible for paying the deductible on their homeowners insurance. If a contractor claims otherwise, consumers should report the incident to DLI at (651) 284-5069 and Better Business Bureau at bbb.org or 1-800-646-6222.