Quick Quiz

Before you hire a contractor, ask to see their:

1. References
2. Power tools
3. Proof of insurance

Checking a contractor’s references is always a good idea, and it’s nice to know they have power tools. However, making sure your contractor has appropriate insurance can protect your assets during a renovation and ensure that you are covered after the job is complete.

Who is on your team?

Your insurance agent is an important part of the renovation team before, during, and after completion of the work. Have him or her:

• Help you decide how much the renovation will increase the value of your home.
  Provide insight on additional coverages you may need at the beginning of the renovation and upon its completion.
• Determine if your contractor’s certificates of insurance provide appropriate coverage for the work being done.

By the time work begins on your renovation, you will either have hired a general contractor to oversee the entire job, or you will have chosen to act as the general contractor yourself. In either case, you are likely to find your home full of sub-contractors (plumbers, carpenters, painters, etc.) who will work on specific parts of the project.

Generally speaking

When you hire a general contractor, there are two primary types of coverage you must require the contractor (and subcontractors) to carry: worker’s compensation and general liability.

1. Worker’s compensation insurance provides coverage to the workers (the general contractor and his/her employees) for job-related injuries. Worker’s compensation is required by most states and is usually governed and regulated by each state’s lawmakers.

2. General liability insurance covers a negligent act or omission that results in property damage or bodily injury (to someone other than the general contractor, his/her employees, and the subcontractors he or she hires).

Both of these forms of insurance cover the policyholder (in this case the general contractor) because s/he is the first person to be found liable if something goes wrong. However, the premises where the work is being performed belongs to you and if the general contractor fails to carry appropriate insurance, an injured party is likely to sue you as well.

Depending on the type of renovation planned, your general contractor may also need to provide a builder’s risk policy. This coverage protects your existing property and the new construction during the course of the renovation, as well as uninstalled appliances, cabinets, carpet, and other items related to the renovation.

Proof positive

When you hire a general contractor or subcontractor, ask for a copy of the worker’s compensation and general liability certificates of insurance. The following details should be on the certificates:

• Effective dates of coverage (If they are about to expire, request an updated certificate.)
• Name of insurance company
• Name of insurance agent
• Amount of coverage purchased (called limits)
• Names of insured parties (Check to make sure the general contractor’s name appears. A sole proprietor can exclude himself/herself from their own worker’s compensation policy.)

Your insurance agent can help you determine the proper limits for the kind of renovation you are planning.

Do-it-your-selfers

When you take on the job of general contractor, you also take on the liability. Your coverage needs can vary greatly depending on the extent of the renovation, and the number of people who will help you do the work.

Each of the following situations could trigger the need for insurance coverage beyond your existing homeowners policy:

• Hiring subcontractors
• Hiring paid help
• Using non-paid help such as family or friends
• Potential loss or damage to building materials prior to use
• Raising the roof

You may require additional insurance coverage if the planned renovation opens your home to the elements. Tearing down exterior walls, replacing windows, doors, a roof, or a chimney can leave your home exposed to theft and weather damage liability. Most homeowners policies do not cover this kind of exposure when it is created by the homeowner.

Condominium controls

Planning to renovate your condominium? Many condominium associations provide coverage for the general structure—from the wall studs out—and you’re not allowed to make any changes to that area. The association often gives you leeway to make improvements from the wall studs in. Check your condominium agreement carefully to see which areas you are allowed to renovate before you begin.

Bond issue

A contractor’s bond ensures that the work will be completed or that you will be compensated. It is proof of financial responsibility. It does not insure the quality of the work, or protect you against theft or damage.

Improving the castle

Some renovations increase the value of your home significantly, while others do not. Do an insurance review with your Trusted Choice® insurance agent once the remodeling is complete to make sure your existing homeowners insurance is providing the correct protection for your newly updated home.

Anybody home?

If you plan to leave your home for more than 30 days during a renovation, you could be jeopardizing your homeowners insurance. Check your policy for vacancy clauses. You can most likely purchase additional coverage if needed.

Contact us at 800-627-2241 if you are planning on a home remodel project.