If you hire a home builder to fix up your house, and your home is not properly insured, any problems such as fire, theft or injury to workers could bounce back into your lap if you hire someone who is uninsured or underinsured.
Builders and renovation professionals have not been this busy in quite some time. That means that you and your neighbors are probably fixing, improving and adding on to your homes. Everyone approaches this topic differently.
Some shop based on price, looking to hire the lowest bidding contractor and others hire on reputation and quality, looking to replicate finished work that you’ve seen somewhere else. Whichever route you choose, make sure that you don’t leave yourself liable for any damages that arise in the ordinary course of construction.
You start this process in two ways. The first is to let your insurer know that there will be work going on in your home. Some carriers will ask you to complete a construction or renovation application. In this application, you are asked a lot of information that you may not have considered.
You want actual proof that the contractor of your choice has coverage that will protect you. You will want to see a copy of the coverage and a certificate showing that the coverage is current and that the work performed at your home will fall under the protection of their insurance.
Don’t just accept their certificate of coverage and feel protected. Ask your agent and your homeowner’s insurance company to review this policy and ask if you need to ask the contractor to obtain any additional coverage.
Also ask the contractor if they plan on hiring any temporary or other subcontractors to help with the work. If your builder uses uninsured workers or subcontractors, once again you may be exposed if they are not included in the contractor’s policy or lack their own coverage. If you hire a general contractor, be sure that they require evidence that all of the subcontractors of his choosing are properly insured.
Ask if the builder has had any claims in the past. Whether it is for poor workmanship, workers compensation for injuries on the job or fire – you need to know whether the builder of your choice is prone to claims.
It is also prudent to perform a background check on the contractor and all of his employees and subs. The last thing that you want is an employee or sub with a criminal record walking around your home when you are not there.
While most contractors are ethical and not intentionally doing bad work, the busier that the construction industry gets the more likely it is that you may be working with a firm other than your first choice. It costs you nothing to very little to do this right. Don’t leave yourself unprotected for liabilities created by others.
John P. Napolitano CFP, CPA is CEO of U.S. Wealth Management in Braintree, Mass. Visit JohnPNapolitano on LinkedIn or uswealthnapolitano.com. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. John Napolitano is a registered principal with and securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through US Financial Advisors, a Registered Investment Advisor. US Financial Advisors and US Wealth Management are separate entities from LPL Financial. He can be reached at 781-849-9200.