Calling in a contractor can help you navigate and complete several jobs in your home. Contractors have specialized knowledge and tools and an understanding of local building rules to make home renovations and restorations go more smoothly. Homeowners should check whether a team is insured before hiring them to avoid covering unexpected expenses.
Understanding Insurance Terms
Contractors may have several types of insurance. Here’s an overview of several common types.
General Liability Insurance
General liability insurance is a basic form of insurance that typically covers business assets and activities. Any actions, such as causing property damage, false statements, or even slips and falls, can be covered under these types of plans. General liability insurance can provide good financial and legal protection.
Workers’ Compensation
Workers’ compensation insurance ensures that workers of different organizations can cover medical expenses and lost wages if they undergo work-related injuries and illnesses. It’s more comprehensive and focused on employee protection. Others may aim to obtain a contractor’s all-risk insurance, which essentially handles property damage and third-party injury or damage under its policy.
Tools and Equipment Coverage
Sometimes, tools and equipment can go missing, be stolen or damaged. If a construction business has tools and equipment coverage, it means the homeowner is not liable for any of those situations. The policy can also help contractors replace key tools, minimizing disruptions and ensuring your project finishes right on time.
Why It’s Important to Have Insurance
Here are compelling reasons why contractors should have insurance coverage.
Accident Protection
Accidents are common in construction projects and can lead to significant financial impact. A medically consulted injury results in about $43,000 in medical and indemnity costs. Critical conditions may mean even greater expenses. Having insurance policies, such as workers’ compensation, means your contractor and insurer will cover the costs. Other programs can also cover legal fees, judgments and settlements if the worker makes any claims.
Compliance Assurance
Financial and legal protection are often requirements when carrying out a project. If regulatory bodies realize that your contractor lacks insurance coverage, you may have to halt the project or go back to square one. The worst-case scenario is that you have to pay fines on top of the delay.
Delay Prevention
Insurance companies can help pay out and cover the costs that might be slowing down operations. If you’re on a tight timeline or just want to get your house serviced right away, having workers who are in good health and use the right equipment can be advantageous.
What to Ask Before Signing Contracts
To understand financial and legal liability during projects, here are a few questions to ask your contractor before signing anything.
Are You Insured?
If they answer yes, you can proceed to some additional questions. If they answer no, you should reconsider getting other contractors for the job.
Are Insurance Costs Included in the Fees?
Cost questions are vital for ensuring transparency and for knowing whether you’re funding the insurance policy. Always practice professional dialogue and respect during the conversation.
Can You Offer Proof of Insurance?
Asking for proof of insurance, such as a certificate, letter and other documents, can be a good reference for any future problems.
What Are the Policy Limits?
Common insurance programs will only provide a certain amount of money depending on the details of the occurrence. It’s good to know your contractor’s policy limits and whether you’re covering additional fees.
Does Your Policy Cover Subcontractors?
Sometimes, contractors may hire subcontractors to aid them during the project. It’s important to determine whether the subcontractors are insured, in case they are injured or cause damage. Ideally, they are already covered by the original contractors’ policy.
Does Your Insurance Protect the Homeowner?
Certain types of insurance, such as general liability insurance, protect the homeowner, so it’s important to clarify what types of insurance the contractor has. You may also want to look into a standard homeowner’s insurance plan to cover all your bases.
Ensure Proper Coverage
Contractors may already have insurance to protect their assets from the potential cost of injuries and damages. However, it’s still good to clarify, as their financial and legal protection can translate to your own protection as well.
