Why Homeowners Must Ask Contractors for Proof of Insurance

Contractors Proof of Insurance

Spring has sprung!  That means many people are beginning to tackle the long to do lists winter brought on. For many homeowners, that means hiring contractors to take on tough tasks or do the heavy lifting for larger home improvement projects, repairs, and renovations.

Whether your contractor is a roofer, siding installer, landscaper, HVAC contractor or some other specialty, if your contractor doesn’t have the right kind of insurance, it can be an even greater risk than you realize.

Popular home improvement website Angie’s List suggests that you should never sign any paper with a contractor before at least seeing proof of licensing for your state and proof of insurance.

How to Verify Contractor’s Insurance Coverage

We’re long past the day when a simple certificate of insurance serves as valid proof of actual coverage.

You need to verify that coverage is in effect when the work begins on your home. One way to do this is by calling the agent listed on the contractor’s proof of insurance to inquire about the validity of insurance protection and the expected expiration date of the existing policy.

The bottom line is that you want to be confident that your contractor’s protection extends beyond the date of your project if at all possible.  If you receive an ACORD certificate of liability insurance form, it should list key details about the contractor’s coverage, including:

  • Coverage types
  • Policy numbers
  • Insurance coverage limits
  • Policy effective date
  • Policy expiration date

This helps you determine if the insurance protection is sufficient to meet your needs and that the coverage effective dates fall within the time frame of your project. However, it is always wise to verify that the policy is still in effect, with appropriate policy limits, rather than simply accepting the policy at face value.

Types of Insurance You Want Proof of From Contractors

There are two specific types of insurance you want to not only see proof but also verify your contractor has active.

  • Liability insurance
  • Workers compensation insurance (WCI)

If your contractor does not have these coverages, it is in your best interest to choose a different contractor.

But, why is proof of insurance for contractors so important for you, as a homeowner?

Liability Insurance for Contractors

This is all about protecting you if the contractor performs faulty work that does damage to your property or causes injuries to your family or guests. While it does not cover the costs of repairing or replacing the faulty work (you’ll need your contractor to secure a bond for that), it will cover the costs of repairing the damage the bad work causes - which is something the bond does not cover.

If your contractor does not have this type of coverage or has coverage of an insufficient amount to cover medical bills related to the injuries or the costs of repairing the damage the faulty work causes you as the homeowner, to be on the hook for these costs instead.

Workers Compensation Insurance

This type of protection provides payments to workers who are injured while working at your home. If the contractor does not have this type of insurance coverage for his employees and one or more of them are injured while working on your property, the financial fallout could come back on you, with devastating consequences.

You should also make sure that any subcontractors the contractor hires have the required insurance or that your contractor’s insurance extends to the subcontractors he employs for your project. It’s an added layer of protection that may matter more than you realize if someone is injured while working on your home.

What Types of Projects Require Contractor Insurance?

Essentially, any project in which a contractor has employees working on your home is worth verifying insurance. Some specific types of projects that might have you requesting insurance from your contractor include:

  • Electrical work
  • Installation or repairs
  • Plumbing projects
  • Remodeling projects

The bottom line is that anytime you bring a contractor into work on your home or property, you’re taking a huge risk if your contractor does not have adequate insurance protection.

In addition to verifying the insurance your contractor has, the amount of coverage, and effective dates for the protection, you might also consider investing in an umbrella insurance policy of your own before hiring contractors to work on your home. This provides additional liability protection and can be instrumental if bodily injuries occur while a contractor is working on your home.

It’s always a good idea to discuss your risks and potential liabilities when hiring contractors with your insurance agent before making decisions about the contract that best meets your needs. You want to make sure that you have sufficient protection on your end just as much as you want to make sure your contractor has adequate protection on his or hers.

Have more questions about proof of insurance for contractors?

We’re here to answer them. Give us a call here at Coverage Specialists at 866-700-2683.  You can also contact us via email here.