Once you file a home or auto insurance claim, your insurance company may provide a few recommendations for repair shops or contractors to tackle the cleanup and repair work. Insurance company referrals usually come from a preferred vendor network or preferred vendor program. This network includes service providers who have an arrangement with insurers to offer faster service, and sometimes, lower prices in exchange for steady referrals.
Although this list can be helpful, especially when you’re already dealing with damage, insurers don’t always make it clear how preferred vendor programs work. This can lead to confusion or frustration if the vendor’s work or priorities don’t fully align with your expectations as a policyholder.
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A preferred vendor program is a bit like the property-insurance version of a PPO, only there’s no rule that you have to stay in-network. Instead of partnering with doctors and hospitals, property and casualty insurers build networks of approved contractors, auto repair shops, home remediation companies, and other service providers. The goal of building a network like this is to help insurers maintain predictable pricing, speed up repairs, and simplify the claims process.
After an accident or unexpected damage, using a preferred vendor can take some of the pressure off by saving you time and effort in finding a trusted repair shop or contractor. When you’re already dealing with the stress of a catastrophe like a house fire, burst pipe, or severe storm, like a tornado, for example, the last thing you want to do is hunt for someone reliable to handle cleanup and repairs. Therefore, using a recommended professional can alleviate some of the burden and help expedite the repair and recovery process.
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The motivation behind a preferred vendor program ultimately comes down to managing costs and improving the efficiency of the claims process. Claims tend to make up one of the largest expenses for insurers, and by using established pricing and repair guidelines, insurers can keep costs and project management under control.
“Insurers require preferred vendors to hold the proper licenses and certifications to meet both industry and legal standards,” explained Amanda Phelan, account executive at Phelan Insurance Agency.
“That means policyholders can feel confident they’re working with professionals who have already been vetted for quality and compliance. In many cases, estimates are automatically approved when a preferred vendor is used, which can help speed up repairs and reduce claim delays.”
Beyond managing costs, insurers may also use preferred vendor programs to make the claims process easier to manage. When vendors know how an insurer’s claims process works, it can help reduce delays and keep repairs on track. That can be especially useful when many policyholders are filing claims at once, like after a major storm.
Learn more: What I learned after a tornado insurance claim, according to an insurance expert
While using a preferred vendor might feel like the most convenient choice, it’s important to remember that their agreement is with the insurance company, not with you. So even though it may simplify a few steps, it doesn’t always mean you’ll receive the level of repair quality and communication you expect.
When your insurance company offers a list of referrals, what they may not always make clear is that you’re not required to use their preferred vendors. In many states, there are laws in place to prevent insurers from pressuring policyholders to do so. Often called anti-steering laws, these protections allow your insurer to suggest contractors and service providers, but they can’t require you to pick from their list.
“In most cases, policyholders have the right to choose their own contractor,” explained Phelan. “The advantage of working with a preferred vendor is that the insurer already has a relationship with that company, understands their work process, and the claim may move along faster and more smoothly.”
However, in some states, like Florida, insurance companies may include “right to repair” clauses or managed repair programs in their policies. When an insurer has this provision in place, it essentially allows the insurer to choose who handles your repair work. That’s why it’s important to understand how your insurance policy works and what your rights are as a policyholder.
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After a claim, choosing a preferred vendor might seem like the best way to get your project started. It can save you time and reduce some of the stress, but there are also trade-offs to think about.
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Timely repairs: Preferred vendors already know your insurance company’s claims process, so they may be able to start projects sooner and move the repair along more smoothly.
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Prescreened contractors: Finding a reliable contractor can feel overwhelming, especially if you don’t already have someone in mind. Preferred vendors are usually licensed, insured, and screened by the insurer, which can give you some reassurance about their qualifications and quality of work.
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Less back-and-forth: The claims process can come with many different steps. Because preferred vendors can usually communicate directly with the insurer, it may reduce the amount of coordination you have to manage on your own.
Learn more: How much is homeowners insurance? A guide to lowering costs.
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Possible conflicts of interest: Some preferred vendors may rely heavily on insurers for business, which can sometimes influence how they approach your repairs or the materials they choose. This means your best interests may not always be the top priority when the work is being completed.
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Quality can vary: Just because a vendor is on a preferred list doesn’t necessarily guarantee they’ll provide great work. While some vendors are excellent, others may rush or miss important details.
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Less leverage if problems come up: If the repair doesn’t meet your expectations, getting issues resolved may be more challenging. Vendors who work closely with insurers may focus on keeping that relationship strong, which can make follow-up fixes slower or more difficult. And if problems aren’t addressed properly, it could lead to more issues later on.
Learn more: What does home insurance not cover?
Aside from preferred vendors, the claims process can still get confusing. It’s important to know that the line between your insurance company’s recommendations and your own responsibilities can sometimes get a little blurry. After a major loss, like a fire or flood, you may call your insurer and ask for a referral to a cleanup or restoration company. This can be helpful when you need someone quickly, and emergency cleanup is often covered under your policy, up to your limits.
Learn more: How much does flood insurance cost in every state?
But here’s where things can get harder to navigate.
Some companies, like restoration or mitigation companies, may handle both emergency services and rebuilding work. In the moment, it may not be clear that these are actually two separate jobs, and that you have the right to choose who you hire for each one. Even if you decide to hire one company to do both, each service may have its own contract. In other words, once the emergency work is finished and it’s time for the rebuilding phase to begin, a new agreement starts between you and the company.
If you haven’t taken the time to review their background or checked their work quality, that responsibility ultimately falls on you. That said, if issues come up later, you may end up responsible for extra costs or dealing with disputes.
Learn more: Planning a home renovation? Be sure to let your insurer know.
Understand assignment of benefits (AOB) agreements
Another thing you may encounter is that before starting the job, some companies may ask you to sign an Assignment of Benefits (AOB). This agreement lets them work directly with your insurer to manage the claim and collect payment, but it also takes you out of the process. So, if you run into any problems or disputes, you may have less say in how things get resolved.
Remember that AOBs aren’t limited to preferred vendors; they can also come up with companies you contact on your own. So it’s important to be aware of what AOBs entail and avoid signing anything you don’t fully understand.
When you’re dealing with a disaster, it’s easy for details to slip through the cracks. But when you understand the process, it can help you avoid surprises and feel more prepared when decisions come your way.
Learn more: How to shop for homeowners insurance in 5 steps
Deciding whether to hire your own contractor or work with a preferred vendor ultimately comes down to your situation and comfort level. For example, if you have a smaller claim, like a cracked windshield or minor water damage, a preferred vendor could make the most sense for getting the job done in a timely manner.
But for bigger or more complex claims, such as major fire damage, it’s a good idea to get a few quotes and compare contractors so you can choose the one you feel most comfortable working with.
Learn more: Actual cash value vs. replacement cost: Understanding the difference in home insurance
“At the end of the day, homeowners should feel confident in whoever is working on their home,” said Phelan. “If you meet a preferred vendor and something doesn’t feel right, it’s OK to look elsewhere. You’re the one living with the repair, so trust matters just as much as timing or cost.”
Generally speaking, you have the right to choose who you hire to complete the project, even if your insurer gives you a list of referrals. Just make sure you review your policy for any repair clauses. That way, if your policy limits your ability to choose your own vendors, you’ll know what to expect and how to navigate the claims process.
As a homeowner, you typically have the right to choose who you hire as long as your policy doesn’t say otherwise. So even if your insurance company offers a list of preferred vendors, you’re not required to use them. With this in mind, make sure to compare several bids and select the contractor you feel comfortable with and trust to work in your home.
Working with a preferred vendor could help speed up the claim process and keep things more organized. Just remember that the convenience might come with a few trade-offs.
Since preferred vendors usually have ongoing relationships with insurance companies, their decisions may not always align with your exact preferences. That’s why it’s important to research your options and choose a contractor who puts your needs first.
When deciding on a contractor, start by checking out their past work and reviews to make sure you feel good about the quality of their craftsmanship. Then confirm they’re licensed and insured, just to protect yourself. From there, get everything written out clearly and compare a few bids so you can feel confident you’re choosing the right person.
Not necessarily.
“One of the most common misconceptions is that preferred vendors lower their quality or cut corners to save insurers money,” said Phelan. “In practice, these vendors are expected to follow professional and regulatory standards, and most insurers monitor them for compliance and customer satisfaction.”
That said, keep in mind that the level of experience of each company can still vary. Even with the insurer’s oversight in place, it’s always best to review the estimate, ask questions, and make sure you feel comfortable with any contractor doing work in your home.
