Construction and remodeling jobs can get very expensive; but while it’s true that staying within budget should be one of your biggest priorities, it’s equally important to ensure that the contractor you hire has all the necessary contractor’s insurance in place.
Why Your Contractor Must Have Insurance
To state the obvious, you should ONLY work with fully-insured contractors. They are usually not the cheapest choice, but you’ll have peace of mind knowing that they have enough insurance coverage to protect themselves, their employees, and you – the client – in case of damage or accident related to the work they do on your property.
Hiring a contractor that lacks the proper insurance can make you liable for on-the-job injuries, third-party property damage, and other accidents that may occur during the project. On the other hand, if your contractor is insured, the insurance company assumes responsibility over covered risks in the event of a claim.
Types of Insurance Your Contractor Must Have
Before you strike a deal with a contractor or subcontractor, make sure to ask about their insurance coverages. Different states may have different contractors insurance requirements, but at the very minimum, your contractor must have:
- Commercial general liability insurance to cover claims made by third parties for property damage and/or physical injuries that happened as the contracted work was performed. Your contractor must be covered for at least USD 1,000,000 per occurrence and USD 1,000,000 per aggregate.
- Workers’ compensation insurance to cover injuries that workers sustain while on-the-job. Unless exempt, your contractor must have at least USD 500,000 in workers’ compensation insurance, which is the minimum required statutory coverage.
- Ideally, your contractor should also have commercial auto insuranceand a commercial umbrella insurance as added layers of protection. The higher the limit, the better.
How to Verify Contractors Insurance
Contractors can prove that they have the necessary insurance coverages by presenting a Certificate of Liability Insurance. Be forewarned, though, that a certificate is not enough to establish coverage. You need to verify the details with the agent listed in the certificate and request for a certificate of insurance from the contractors insurance company to ensure that the contractor is indeed fully-insured.
Additionally, you may ask the insurer to designate you as an additional insured on your contractor’s general liability insurance as added protection in the event of damages and claims arising from the contractor’s work.
Most importantly, never assume that the contractor you’re dealing with has contractor’s insurance, regardless of how recommended their services are. Always enquire about your prospects’ insurance coverages and check with the insurer yourself. An expired insurance policy is tantamount to no coverage at all.
