When it comes to remodeling your home and realizing your design vision, you have a lot of things to consider, such as the materials you want to use and the timeline for completing the project. If it is an extensive remodel, you will also need to plan workarounds for living in a construction site. In the midst of all that planning, you also need to make sure that your contractors are up-to-snuff; not just in terms of their skills, abilities, and professionalism, but also in terms of their paperwork – specifically contractor liability insurance.
What is contractor liability insurance?
Contractor liability insurance is similar to general business liability insurance, except it’s designed specifically for construction.
Contractor liability insurance primarily protects the contractor from being financially liable for any damages that occur to your home as a result of his work. It also protects the contractor in the event that you, the contractee, or any visitors to your home are injured on the site. It will even protect the contractor in the event that his work aggravates unknown, pre-existing damage to your property – such as damaged and poorly-repaired plumbing that’s hidden by drywall, and becomes aggravated when the drywall is removed.
Why is it Important to You?
Liability insurance doesn’t just protect the contractor, it also protects you. You might think that if your contractor damages your house, or causes injury, he’s responsible either way and will have to pay for the damages or make the repairs free of charge. But here’s the deal; the cost of many damages and injuries are far more than any contractor can afford to pay out of pocket. Additionally, depending on the type of damage, the contractor might not be able to fix it.
For example, let’s say a plumbing contractor breaks a pipe, causing water damage as well as an electrical short that starts a fire that burns down half your house. That plumbing contractor might not have the expertise to fix that electrical short, or the structural damage from a fire, and he might not have the funds to hire other people to do it. Also, there’s the matter of all the stuff that was damaged by the flood and the fire, such as your clothing, electronics, and other items.
Sure, you might be able to take the contractor to court and get a judgment but, in the meantime, you have a home that is uninhabitable due to water and smoke damage, you’ve lost most of your stuff and, if there are injuries, people need medical care.
If your contractor doesn’t have liability insurance, you could end up paying for all of this out of your homeowner’s policy – if your policy will cover it. However, it’s more likely that you will have to pay for it out of your own pocket, and then wait months or years to get anything back through the courts. If you don’t have the money for the repair, or the medical bills, you could end up with a house that you can’t live in, and potential financial ruin from medical bills that you can’t pay.
Getting Contractor’s Insurance
Your contractor is responsible for getting his own insurance, and there are several companies that specialize in contractor insurance policies, as well as other types of construction-related coverage such as surety bonds, and equipment coverage.
If your contractor has equipment coverage and a surety bond, he still needs liability insurance. Equipment coverage will only cover loss or damage to his equipment, and a surety bond only guarantees his work, it does not cover accidents, injuries, or damage as a result of his work.
When you hire a contractor, you should make sure that he has coverage before he begins your project. He should be able to provide a copy of his certificate of liability insurance, with the effective dates clearly visible. If he hires subcontractors, you should also make sure that they all have certificates of liability insurance as well; otherwise you could get stuck holding the bag if a subcontractor causes damage and the main contractor’s liability insurance doesn’t cover it.
If a contractor, or subcontractor, is not able to produce proof if insurance, then do not sign the contract or let him start the job until he has that documentation.
Another option is to make liability insurance a provision in his work contract – the contractor has a set deadline for when he must produce valid proof of insurance for himself and all subcontractors, if he cannot produce the documentation by the deadline, then the contract is null and void and you can hire a different contractor.
If a contractor refuses to make liability insurance part of the terms of the contract, or tries to pressure you into signing the contract without proof of liability insurance for himself, and his subs, then start looking for another contractor.