Superstorm Sandy is the most recent large-scale natural disaster to hit the United States. Sandy caused an estimated $25 billion in damages and left 7.5 million customers without power in 15 states along the east coast. A disaster of this magnitude means two things: people need help and con artists will try to take advantage of victims' desperation.

Here are some of the most common natural disaster scams and how to avoid being a victim.

Identity Theft
The Federal Emergency Management Agency reports that people pretending to be FEMA or other government officials are calling or going door-to-door asking for personal information. FEMA advises citizens not to give out their social security number, banking information or other forms of identification. Crooks use this type of data to perpetrate all manner of identity theft crimes. Legitimate businesses and government agencies will go to great lengths to protect your identity. FEMA and the Small Business Administration (SBA) will not ask for personal information until the victim first contacts them. Do not respond to unsolicited phone calls or visits. Make the contact yourself.

Fake Victims
Social media has revolutionized how people communicate. Unfortunately, it has also revolutionized how con artists communicate with potential prey. Stories of loss tug at the heartstrings of the caring public. Pleas for help have been posted, tweeted, reposted and retweeted so much that it is impossible to separate the cons from the legitimate requests. Some of these cries for help are fabricated. If you want to contribute, stick with the most effective charities and charities you know. If you want to provide more direct aid, work with family or friends who know of individuals in need.

Speaking of Charities
Read carefully the name of the charity asking for donations. Unscrupulous organizations may adopt a name closely related to a well-known charity in an attempt to trick donors. Perform an online search using the keyword phrase: "exempt organizations select check" to find qualified charities with tax-deductible status from the IRS. The website CharityNavigator.org is the nation's largest and most-utilized evaluator of charities. Charity Navigator, a free service, provides a complete evaluation of everything from program and administrative expenses to fundraising efficiency.

Crooked Contractors
When disaster strikes, contractors flood the area to cash in on the rebuilding effort. Many are ethical and registered legitimate businesses. Some are not. Before working with a contractor, ask for a copy of the contractor's liability insurance and verify that the policy is valid. Ask for and check out references if possible. Call or go online to check with the Better Business Bureau (BBB). Online review services, such as Angie's List, can also help. A detailed list of all work to be performed should appear on the contract and full payment should not be required until the work is completed to your satisfaction. Do not fall for: "I don't have the money to buy the supplies unless you pay all of it up front." Legitimate businesses front the cost of supplies and labor.

Insurance Cons
Beware of "specialists" who say they can increase the amount of FEMA aid you receive or bump up your insurance settlement. In return, they will probably ask you to sign a contract that gives them a certain percentage of the extra funds. Not only is this a potential for identity theft, but a contract like this may force you to give them a percentage of money that would have been yours anyway. Deal directly with FEMA or your insurance company if you feel the original aid or settlement is not satisfactory.

Report It
If you believe that somebody contacted you with illegal intentions, do not stay silent. Contact local law enforcement officials, the FBI or the National Center for Disaster Fraud. You may have seen through the con artist, but your neighbor may fall victim.

The Bottom Line
It is not just this storm. Any time a disaster of this magnitude happens con artists and thieves will try to take advantage of people when they are most in need of human kindness. Knowing what to look for will help you to separate the Good Samaritan from the wolf in sheep's clothing.

Related Articles
  1. Home & Auto

    4 Areas to Consider Roofing Material Types

    Roofing your home is very important, that’s why you should choose a roof specifically designed to handle your area’s climate.
  2. Home & Auto

    Après Ski to Profit: Investing in a Swiss Chalet

    Evolving Swiss property laws mean that Swiss ski chalets have become precious commodities – and excellent investments, even if you're not British royalty.
  3. Home & Auto

    Is Running a Short-Term Rental Worth the Hassle?

    The pros and cons of hosting short-term rentals in your home.
  4. Insurance

    How to Shop for Home Insurance

    Tips for getting the best protection for your place and possessions.
  5. Investing Basics

    Toshiba's Accounting Scandal: How It Happened

    Learn how Toshiba's corporate culture and lax internal controls led to an accounting scandal that ended with the resignation of the company's CEO.
  6. Credit & Loans

    The Hi-Tech Future of Mortgage Applications

    Three sites that are simplifying your path to home ownership.
  7. Home & Auto

    Best Real Estate Apps for House Hunters

    Your dream home might be only a swipe away.
  8. Home & Auto

    When's the Best Time to Sell a House?

    Your timing is a key element in when to sell a house. Here's what to consider.
  9. Home & Auto

    Before You Buy a Home for Your Child: Read This

    It is certainly generous. It can even be advantageous to both of you. But beware of the pitfalls.
  10. Professionals

    Is Your Financial Advisor Looking Out for You?

    Financial advisors sometimes aren't looking out for clients' best interests. Regulators are scrutinizing their practices; investors should too.
RELATED TERMS
  1. Black Money

    Money earned through any illegal activity controlled by country ...
  2. Indemnity

    Indemnity is compensation for damages or loss. Indemnity in the ...
  3. Comprehensive Glass Policy

    An insurance policy that covers glass that has been broken or ...
  4. Coastal Barrier Improvement (CBI) ...

    A federal law that makes federal disaster relief and federal ...
  5. Directors And Officers Liability ...

    Directors and officers liability insurance covers you if you're ...
  6. Credit Card Dump

    The unauthorized copying of all the information contained in ...
RELATED FAQS
  1. What are some high-profile examples of wash trading schemes?

    In 2012, the Royal Bank of Canada (RBC) was accused of a complex wash trading scheme to profit from a Canadian tax provision, ... Read Full Answer >>
  2. What are the main factors that impact share prices in the insurance sector?

    The main factors that impact share prices in the insurance sector are interest rates, earnings and actuarial risk. In the ... Read Full Answer >>
  3. Why do insurance policies have deductibles?

    Insurance policies have deductibles for behavioral and financial reasons. Moral Hazards Deductibles mitigate the behavioral ... Read Full Answer >>
  4. How should a whistleblower report unlawful or unethical behavior?

    Whistleblowing takes many forms. A whistleblower could expose government corruption, expose unethical business behavior or ... Read Full Answer >>
  5. How do insurance companies use a whistleblower?

    Fraudulent claims are among the most prevalent and serious business risks that insurance companies face. Many consumers have ... Read Full Answer >>
  6. What are examples of inherent risk?

    Inherent risk is the risk imposed by complex transactions that require significant estimation in assessing the impact on ... Read Full Answer >>

You May Also Like

Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!