Home renovations, repairs and remodels not only make your house a home, but they can be a profitable investment in the long run. However, if you’re contracting someone else to do the work, be sure to protect yourself from potential faulty workmanship, worker injuries, theft or damage done to your property.
Now, while it might sound like this would require a lengthy phone call with your insurance agent to review your home insurance policy coverages, the solution is actually much simpler: just ask the contractor for proof of their insurance.
To properly protect yourself from unexpected accidents and losses, you should verify that your contractor has three things:
Liability Insurance is in Force
All contractors should carry at least two types of insurance before you hire them: liability insurance and workers’ compensation. Liability insurance can protect you from contractor damages done to your home. For example, if the plumber installs a new toilet in the upstairs bathroom and it falls through the floor, their liability insurance should repair the damage, and this protects you from being financially responsible for the repairs.
Workers’ compensation, on the other hand, protects you from being liable as the “employer” so that you don’t have to foot the bill in the event of worker injury. For example, if a roofer happens to fall through the roof and ends up with a broken leg, you will not be liable for the damages. Without workers’ compensation, your homeowners insurance could still help cover the cost of the claim, but the claim can likely result in an increase of your premium, which makes it more difficult for you to get coverage in the future.
A Performance Bond is in Place
While often mistaken for insurance, a bond serves a different purpose. A performance bond is what ensures that the project gets completed if a contractor defaults on the job. Essentially, it is secured money that is distributed to the homeowner if a contractor fails to perform their job, or it is used to compensate the project owner for the financial loss incurred. For instance, if you hire a contractor to construct an addition to your home and one day the contractor quits showing up and never finishes it, the bond would ensure that the job gets completed by another party.
Although many contractors often say they are “bonded,” that doesn’t mean they are bonded for your particular project. So, it’s important to ask for proof that your contractor is insured and bonded for your project, and be sure to understand what the bond covers. It can be argued that bonds for small jobs aren’t necessary, but for larger jobs like remodels and additions, making sure your contractor has a performance bond in place for your project could be very beneficial for you should a failure-to-perform claim arise.
The Contractor is Licensed
Finally, you’ll want to make sure that your contractor holds a current license to do business in your city. A license ensures that your contractor has completed the required training necessary in his or her industry within your area. Unlicensed contractors tempt customers by charging lower prices, but the risks are high and can end up costing customers if the work does not meet local building standards or the contractor does not acquire the legal permits necessary for the project. Furthermore, there are certain states that don’t allow homeowners to file claims or sue in court if the contractor is not licensed,so the homeowner becomes liable for the total cost of any wrongdoing.
Home improvement projects can get messy when they don’t go as planned, so do yourself a favor and check to make sure your contractor is insured, bonded and licensed. Hiring the right company the first time will keep you protected from unexpected costs, legal issues and unnecessary stress.
Author: Ashley Brasseaux
Ashley has been a part of the IB team from the beginning. She’s passionate about protecting consumers by making sure businesses have insurance.