Published on July 8th, 2022
Working with a properly insured and licensed contractor may seem like an obvious choice when looking for service contractors for your project.
Still, for many homeowners, the temptation to go with the lowest bid or quote can make verifying insurance seem like an afterthought.
However, taking the time to check and ensure a contractor has the proper, up-to-date insurance coverage is key to ensuring that your project, personnel, and property are safe, protected and do not end up costing you more money in the long run!
Protecting Your Property
The best rule of thumb is never to assume that a contractor has a license or insurance. While personal or family recommendations or referrals can go a long way, the only way to be sure a contractor is fully licensed and insured is to verify it on your own or through a licensed insurance professional.
You can do a few things to protect yourself and your property during your construction, and putting a little time and diligence on the front end can save high costs and frustrations down the road.
How Do I Check A Contractor’s License?
Did you know that all contractor advertisements, from billboards to business cards, must display a valid state contractor’s license number?
According to the Department of Consumer Affairs, contractors must have their license number on their business cards and on all bids and contracts they draw up.
Using their online tool to determine whether a contractor has a valid license for your project is quick and easy. Visit their online license verification tool or contact them to get an assistance on an insurance review.
That’s the first but not the only step to deciding whether to hire a contractor.
How Do I Check A Contractor’s Insurance?
When working with a licensed contractor, you can request that they provide you with proof of insurance by presenting their certificate of insurance from their insurance company.
This certificate is the best way for you to verify their insurance coverage is up to date. You can contact the insurance company and ask them to confirm that the policy is still in effect and has the appropriate insurance policies to protect all aspects of you and your property.
Are All Insurance Policies Created Equal?
After verifying their license and insurance is valid, you must check their insurance policy to ensure that they are insured contractors AND have the proper insurance for your project.
All insurance is not created equal. Just like homeowner’s insurance has different policies and protections based on where you live, contractors may also opt-in and out of specific coverage.
There are generally three different categories you should obtain proof of insurance, policies to protect yourself and your property when hiring contractors, whether they are independent contractors or part of a larger organization.
Verify these categories to ensure your contractor’s insurance protects against all that you need and your construction or renovation does not become problematic.
What Insurance Coverage Should My Contractor Have?
1. General Liability Insurance
A general liability insurance policy covers risks like bodily injury to you or any other visitors to the site and protects against any property damage they may cause.
This general liability insurance policy also protects against claims of faulty workmanship and functions as professional liability insurance.
2. Builder’s Risk Insurance
This insurance policy is specifically designed to protect buildings and structures being built or renovated. Not only does it cover the costs of construction, but it also covers the equipment being used in the construction project.
3. Workers Compensation Insurance
Workers Compensation Insurance is an insurance contract that an employer buys to protect a contractor’s employees if they are hurt at work.
It protects homeowners from paying for an injury or medical bills if someone is injured on your project site.
Bottom Line: Do Your Due Diligence Before Hiring A Contractor
Remember that many hidden costs can arise if a contractor is not properly licensed or insured and is working on your job.
While the cheapest price can be enticing initially, if damage or injury happens on your property and a hired contractor is not adequately insured, you (as the homeowner) could be found responsible for paying for the expenses and medical bills that are not covered.
When hiring a contractor, it is essential to consider the risks involved and hire someone properly insured and licensed.
The best way to keep yourself and your property protected, and to avoid having to pay for damages or be financially responsible if something happens on your job site, is to contact an independent insurance agent, also known as a broker, to provide the proper and trusted coverage for you.
For more information on independent insurance agents that can ensure you and your contractor have the proper liability coverage, visit Contractors Liability , since they work with multiple carriers, they have a wide expertise on the industry and certainly it is much easier and less expensive to get a policy that specifically meets your project’s needs and requirements.
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