Will your Contractor Insurance cover all eventualities?
Before awarding a project to a contractor, the homeowner must verify that the contractor is adequately insured.
The contractor must supply proof that he is current with Workman's Compensation - which covers injuries to the contractor and employees whilst working on your project - as well as General / Personal liability which insures you property.
The homeowner must insist on a certificate (not photocopies) from a reputable contractors insurance company, listing the contractor with the homeowner as co-insured.
Our main Contractor page has links to all the related information and free legal forms for general contractors.
Site security is normally the responsibility of the contractor, such as when a new building is being constructed. In this case, the contractor will carry the risk for stolen or damaged materials or tools.
It becomes a bit more complicated when the owner may be supplying some of the materials e.g. a stained glass window or recovered pressed ceilings that must be built in. The homeowner should agree on a value for these items with the contractor and get legal advice on how best to assign risk for these special items in the contractor agreement.
If the project is at your home, there may be other goods (such as vehicles, a garden statue, prized plant etc.) at risk. Get advice from your own insurance company, automobile insurance company and the contractor's insurance agency on how best to cover all risks.
Note: It is preferable to the homeowner to have adequate contractor insurance in place, rather than having the burden on his homeowners insurance. Take photographs and copies of identity documents of all workers on site.
The biggest nightmare to any homeowner when building a home, is the bankruptcy of the contractor midway through the project!
Especially in the case of larger projects, the owner should require the contractor to cause a performance bond to be issued in favor of the homeowner.
In the event of insolvency of the contractor, or if the work is substantially not performed to regulations or the specifications as laid out in the General Contractor Agreement, the homeowner can claim monetary loss up to the amount of the performance bond.
The homeowner must ensure that the amount specified, which is the maximum that will be paid out, is sufficient to cover losses.
The homeowner can further protect himself by filing the payment and performance bond as well as a copy of the contractor agreement with the County Recorder.
For more information on selecting a general contractor and waiver of lien forms, please refer to our General Contractor page.