When you think about hiring someone to work in your house, I’ll bet that one of the things you think about is insurance.
And if not, construction insurance is something you really need to think about before you even start the project.
There are so many questions. How do you know if you’re fully protected during the remodel project? Can you check if your contractor has enough insurance? Does your homeowner’s insurance cover workers? Are there any differences between the insurance of one contractor vs the one of another contractor?
The best we can do is size up the chances, calculate the risks involved, estimate our ability to deal with them, and then make our plans with confidence. – HENRY FORD
And if you are about to hire a contractor to work on your home.
5 smart actions you should take to protect yourself
- Confirm that your contractor is insured
- Once the contractor is hired get the insurance certificate for your project
- Get additional coverage for yourself without paying for it
- Find out what an insurance professional thinks of the insurance your contractor carries
- Learn how to make sure that everyone that works on your house is insured
Confirm That Your Contractor Is Insured
You’ll often see the words ‘Fully Insured’ on contractors trucks. And when you sign an agreement with a contractor, there’s usually some language to say that the contractor is insured.
That sounds great. But what does it really mean for you?
In most places, contractors must carry liability insurance and workers compensation insurance.
Most contractors carry a lot of liability insurance. And it costs them dearly every year! In fact insurance is one of a contractor’s biggest expenses.
Good contractors carry better insurance than the bad contractors.
They’ll invest in the high premiums so that they are well protected. And because it costs them so much, they’ll happily present you with proof of their insurance!
The bad apples will cut corners on insurance if they can.
Get An Construction Insurance Certificate From Your Contractor
When you’re considering which contractor to hire, ask each of them for a copy of their Accord Form insurance certificate from another job.
Tell them they can blank out any information that would identify the job. The insurance certificate is a standardized form.
It lists the types of insurance, the names of the carriers, the policy numbers, the limits of liability and the expiration dates.
Your contractor should volunteer to provide an insurance certificate when you sign the contract.
And it’s a big red flag if a contractor seems to hesitate or make excuses.
Become an Additional Insured
The Accord Form may name you as a Certificate Holder. Sounds important, doesn’t it? But what does it really mean? Not a lot. It just means that the insurance company is required to notify you when a policy is about to expire.
You have rights under the contractors policy that can save you a lot of money if something goes wrong and you are additional insured . The liability coverage may be better than the coverage in your homeowners policy. Your agent or broker can fill you in on the details.
Have Your Insurance Agent Look at the Certificate
The insurance certificate is a standardized form. But most people won’t be familiar with it.
Your insurance professional is going to be familiar with it. And he can let you know if there are any glaring omissions or problems.
Are There Different Kinds of Contractor Insurance?
You need to know that the contractor you are hiring has Liability Insurance and Workers Compensation Insurance.
The Worker’s Compensation Insurance protects workers if they are hurt and at the same time it limits their rights to make other claims.
Workers Compensation insurance is standardized.
The General Liability insurance is designed to protect the construction company when something goes badly wrong.
Each insurance company writes a slightly different policy with different terms.
That’s why it’s so important to get a copy of an insurance certificate early on. Send it to you own insurance broker for an opinion.
How Can You Protect Yourself?
If you are hiring a General Contractor make sure you receive a copy of the insurance certificates from each subcontractor. Get the certificates before the subcontractor starts work.
Confirm that there’s a clause in the contract saying the client is to receive insurance certificates for each sub-contractor.
A reputable general contractor will get insurance certificates from subcontractors. The General Contractor wants that protection too. And so it’s no extra work to get certificates for you.
Don’t be too concerned if you receive notification that a policy is about to expire. If you receive the notice right around the time the policy expires it’s probably because the contractor is not going to renew the policy with that insurance company. The contractor will give you a new Accord Form when the new policy goes into effect. But if you receive the notice at any other time, be proactive.
Send the notice you received to your own insurance agent and get their advice
Send a notice to your contractor that you require a new Accord Form
Finally, don’t allow work to continue once the insurance cancellation has gone into effect. Wait until you have a new certificate that you’re satisfied with.
I am not lawyer and I’m not an insurance professional. My goal is to give you enough information so that you can ask questions of your contractor, your own insurance broker and maybe even your lawyer.
When you know even a little about construction insurance you’ll know some of the ways to reduce the risks as your new kitchen comes together.