Are Your Pros Insured?
Make sure you're covered when work is being done on your home
Making sure you have proper insurance coverage when work is being done on your home often means upgrading your homeowner's policy. The goal is to make sure your policy and those of anyone working on your home cover injuries to people, materials, the existing house and the new work.
Sounds simple, but any insurance agent can tell you horror stories. Tom Shaw, marketing manager for Madison, New Jersey-based Atlantic Mutual Insurance Company, recalls a minor roof repair that ended up costing $1 million. "The roofer used a blowtorch," says Shaw, igniting the house, which burned.
Thousand-dollar job, million-dollar claim." Atlantic Mutual paid the claim and then sued the contractor and roofer as well as their insurers.
What coverage is right? If you're hiring a general contractor for an addition, upgrade your homeowner's policy before the job starts so the addition is covered as it's being built. And carry at least $1 million in liability coverage on your homeowner's policy. Also, to cover injuries, damages and uninstalled materials, ask for written proof of the contractor's license, workers'-compensation coverage and a general liability policy. For large jobs, you can ask your contractor for a performance bond (you might have to share costs), which protects you if your contractor fails to finish the job. List any valuables you have with your agent and ask the contractor to carry fidelity insurance, which guards against theft. Also require proof of workers'-compensation coverage for subcontractors working on your project. If they don't carry it and someone gets injured, you're liable.
If you're acting as your own contractor, make sure the subcontractors you hire have a current license, general liability insurance and workers' comp for their employees.
If you're doing the work yourself, your homeowner's policy often will cover you, with one exception: uninstalled materials (for example, if you crash a hammer through a $500 French door). Check with your agent—a good idea in any situation—and see about extending coverage. For a good primer, check out the Insurance Information Institute.
You're not alone when it comes to undertaking home renovations. Here are some stats from the Census Bureau (circa 1993):
Of the 94,724,000 households, additions were put on 2,469,000; homeowners did at least some of the work in 44 percent of these cases.
Kitchens were even more popular: 5,033,000 kitchens were remodeled, 2,568,000 of them partially built by the homeowners; 37 percent of these jobs cost less than $500.
Baths also got upgraded: 6,126,000 bathrooms were remodeled, with 3,420,000 homeowners doing some of the work; 50 percent of these projects cost less than $500.