Contractor Insurance-Avoiding loss when you remodel, repair, or build a new home

Risk is an uncertainty you assume everyday and sometimes it can result in loss. Insurance is a resource that protects you against major financial loss because the risk of loss is transferred to the insurance company. In exchange for a small fee (the premium), you are likely protected against potentially large losses.

In construction, insurance is essential not only to the contractor who purchases it, but also to the homeowner who may otherwise be exposed to loss associated with his or her remodel, repair or new construction project. For example, if a construction worker is not covered by (workers' compensation) insurance and is injured on your jobsite, he or she may be unable to pay the medical expenses owed to the hospital and physician. As a result, these unpaid health-care providers and the injured worker may file a lawsuit against the general contractor, subcontractor, you, and others as a means to pay for costs associated with the injury. Lawsuits have also been filed by members of the public who were injured while trespassing on jobsites. Regardless of whether these lawsuits have merit, all parties named in the suit must spend time and money to refute the claims. Because these losses can be substantial, it is important that insurance is in place and that you understand these types of insurances and what they cover.

Protection against loss

Workers' compensation and general liability insurance are two types of insurance available to contractors. A major difference between workers' compensation insurance and general liability insurance is that workers' compensation covers the employees of a company while general liability covers the public affected by a company's operation.

Workers' compensation insurance covers the cost of medical, disability, and death claims of employees who suffer job related injuries or illness. Workers' compensation insurance also covers the cost for physical rehabilitation and vocational retraining needed to facilitate an employee's return to work. (These costs are subject to limits as provided by the laws of each state.)

In contrast, general liability insurance protects against claims from the public that result from a company's negligent acts or products. A typical general liability policy will cover both property damage and bodily injury. In regard to property damage, consider this example: A roofer has the important task of installing a roof that is weather tight so that the house remains dry. If a roofing contractor installs the roof incorrectly and the roof leaks, this can damage the ceiling, walls, and floor. This damage to the work of other contractors is most likely covered by the roofer's general liability policy. (Note: The insurance does not pay for the cost to fix the defective roof itself"• only the collateral damage caused by the defective roof. The cost to remedy the roof is the responsibility of the roofing contractor.) If this roofer does not have general liability insurance, and is unwilling or unable to cover the cost of damage, he may abandon the job leaving you to pay for the damage.

The public's wellbeing must also be considered. Sometimes Joe Public is unintentionally injured (either on or off your jobsite) as a result of your project. For example, Joe may trip over your construction debris off the jobsite or he could fall in a trench on your jobsite. And surprisingly, some claims are made and won by people who trespass on a jobsite and are subsequently injured. These claimants may state that the jobsite was poorly marked and unsecured. The contractor's general liability insurance addresses the medical and disability expenses of these injured parties, thereby protecting you from costs that might be passed to you if the policy were not in place.

Verifying coverage

Although a contractor con provide you with proof of coverage, you should verify a contractor's coverage with the state or directly with his or her insurance company. Workers' Compensation can be verified at your state's Workers' Compensation Division and is readily accomplished by phone or by searching the website database. General Liability coverage should be verified directly with the contractor's insurance company once the contractor provides you with the insurance company name and contact information. To remain informed of any changes in the contractor's policy, such as policy amounts, cancellations, and renewals, asked to be listed as a "certificate holder".

Builders risk insurance

Many people are familiar with homeowners' insurance as a means to protect the finished home from damage arising from fire, theft, and other losses. In contrast, sometimes the value of the house is overlooked while it is under construction. From the moment your project breaks ground, thousands of dollars are spent to complete it. While under construction, your project is also exposed to the damages of fire, flood, windstorms, vandalism, and other perils. For example, trusses and block walls can fall over as a result of strong winds. Therefore, a new house, as well as any costly renovations and additions, should be insured while construction is under way.

Builders' risk insurance is a form of property insurance that protects against the loss of material and labor costs while the house is under construction. In addition to insuring the materials and labor already incorporated into the building, builders' risk insurance covers the cost of materials stored on site that are damaged or lost due to most "Acts of God". A separate policy rider typically covers loss due to theft.

But it is important to note, that whereas workers' compensation and general liability insurance is often required by the State, builders risk insurance is the responsibility of the owner or contractor.The importance of business insurance

Remodeling, Repairing, or Building A New House?

Because loss can be costly, it is important that the contractors, workers and the home are insured. Therefore you should consult with a licensed insurance agent who is familiar with state and federal regulations. This professional can analyze your exposure to risk and determine whether or not your coverage (and your contractor's coverage) is sufficient.