Why and how your contractor should be insured

They say the devil is in the details. That is certainly the case when it comes to remodeling. An example is in the insurance area. It’s probably common knowledge that the contractor or contractors you hire to remodel your home must be insured, but what exactly does that mean?

Contractors carry 3 basic types of insurance: vehicle, liability, and workers’ compensation.

Everyone is familiar with the first type. Covers accidents to persons or things caused by or involving the insured’s vehicle(s). Your contractor should carry this type to protect you in case they injure you, someone else, or property with a vehicle they own, control, or use while at home doing the work you hired them to do.

The second type protects you in case you, someone else, or your property is damaged as a result of the contractor’s work. This would cover such things as a piece of furniture that the contractor breaks while he is working on his home. It would cover medical costs if your child steps on uneven debris that is left lying around the workplace. It would cover a neighbor who trips and falls on a wire or hose and is injured.

If there is an incident, the contractor may choose to pay the cost themselves rather than file a claim against your insurance and risk an increased premium. Regardless, the insurance must be sufficient and current to cover any reasonably possible accidents.

It’s also a good idea to be familiar with your homeowner’s policy regarding these types of incidents and you can always ask your agent if the certificate of insurance provided by the contractor is adequate for your protection.

The third type of insurance is worker’s compensation. This type of insurance is meant to cover any injuries sustained by someone who works in your home. This type is a bit more complicated.

In most states, business owners are not required to carry workers’ compensation insurance. If you are injured on the job, you and your homeowner’s insurance company could be sued.

If the contractor has a workers’ compensation policy, who does it cover? Is the owner covered if he is working on the job? What about the other workers who may or may not be your employees? The time to make sure you’re adequately protected is before the contract is signed and work begins. All of this only becomes important, of course, if there is an incident. However, you have nothing to gain, but everything to lose if something drastic happens and you are responsible.

It is always best to consult with an insurance and loss prevention expert in the area in which you live.