Many renovators assume that contractors and subcontractors carry liability insurance. It is wise to find out, however, to avoid taking on insurance liability that doesn’t belong to you.

 

The following information represents an ideal scenario, but use your own judgment as to whether it is appropriate to your situation and the size of the project. If you are adding an addition to your house it may be more important than if you’re hiring your uncle to install light fixtures.

 

Certificate of Insurance

Insurance issues can be avoided by verifying that people you hire have the appropriate liability coverage, as evidenced by a Certificate of Insurance.

 

The Certificate of Insurance is a document, usually one to three pages, which details the types and amounts of coverage held by the contractor and/or subcontractor.  Here’s what to look for:

 

·        General Liability coverage at a minimum of $300,000 though $500,000 of coverage, or more, is even better

·        Products & Completed Operations coverage

·        A highly rated insurance company.

 

General Liability

This coverage insures against the possibility of damage to property and/or persons while at your home.  If you’ve hired someone to handle a small job -- say, retiling your shower stall -- then $300,000 of coverage is probably adequate.  If you’re having a new addition added to your home, then you may wish to see coverage of $1,000,000 or more.

 

Products & Completed Operations

This insurance covers the work after the project has been completed.  This is important in the event that you discover six weeks later – or six months later -- that the roof leaks or there are other problems with the work.

 

Highly Rated Insurer

How do you know if the insurance carrier is highly rated?  Check out these resources:

 

·        A.M. Best is an independent company that rates insurance carriers. Look up the insurer in one of their publications, or go to their web site, www.ambest.com for information.

·        Contact your state’s Department of Insurance to find out how the carrier is judged by independent sources.  

·        Telephone your local insurance agent.  They may be glad to help you discover an insurance company’s rating.

 

Evidence Of Workman’s Comp

If your subcontractor has several people working with him or her or if you’ve hired a general contractor, verify that the contractor carries Workman’s Compensation coverage.  This type of insurance covers the employees of the person you’ve hired in the event of a mishap or injury.

 

Don’t be shy about asking for verification of coverage.  Most contractors and many subcontractors carry this insurance and are glad to supply you with proof.  It only takes a moment, and can save you potential headaches – and costs – down the road.

 

Laws Vary

Also, be aware that some states or municipalities have different laws regarding how much insurance a contractor is required to carry. Contact your state or local government to learn more.