Don’t get caught short -Important things you need to know about insurance and your home improvement project
You have been dreaming about it, and now you’re ready to start that home improvement project. You are on the hunt for a licensed contractor and have selected a few that you are preparing to interview. Your questions are ready: References? Years in business? Insurance? Wait – you don’t have any questions about insurance! Your project is a complex process that can involve many individuals and companies, most of whom will actually be working in or around your home. In preparing for your project, don’t overlook the importance of having appropriate levels of insurance protection. The following tips and guidelines will help you ask the right insurance questions.
Proof of Insurance – Don’t Be Afraid To Ask
Ask the prospective contractor to provide certificates of insurance. This is simply smart business, so the contractor should not be offended when you make such a request. Having the certificate mailed or emailed directly from the contractor’s insurance agency is the best way to be sure that the insurance certificate is valid and the coverage listed is in force. If the contractor prospect can’t provide you with this information or seems unwilling to do so, move on to the next one.
As the property owner, you are financially responsible if a worker is injured on your project and his employer does not have worker’s compensation coverage. Be sure that any contractor you hire has worker’s compensation insurance if he has employees. If the general contractor has coverage, his insurance will also protect subcontractors’ employees. The safest policy is to ask the general contractor to furnish proof that his subcontractors have worker’s compensation. This information should be made readily available to you.
Ask about the general liability limits the contractor has. You should require that the limits be a minimum $1,000,000/$2,000,000 with at least a $1,000,000 umbrella or an excess liability policy. Ask the contractor if he has any claims pending or situations that might develop into claims. Policies today are written with a “per occurrence” limit and a policy year limit. If there are other claims pending or likely to develop you might not have the protection you expect.
Ideally, you want the liability policy to be an “occurrence form”, not a “claims made” form. The occurrence form gives you the best chance of recouping a future loss.
Also ask if the contractor’s liability policy covers “broad form” property damage. The standard liability policy excludes property in the care, custody and control of an insured. The contractor has custody and control of any part of your home he is working on, so any damage that occurs may not be covered. “Broad form” coverage takes care of this for you.
Following these guidelines can help ensure a little peace of mind during your project.
(by Dean Fletcher, CIC, CRM, Mission Counties Insurance Agency, Inc., San Jose. Dean has been in the insurance industry since 1969 and founded Mission Counties Insurance in 1977.)